Question

What could a financial manager look at to determine whether his company is successful or in distress? Give an example of a success or distress in today's business world.

Answer 1

Financial manager will be looking at following things in order to determine whether the company is in success or in financial distress-

A. financial manager will be looking at the cash flow generation ability of the company for the longer period of time and if the company is cash rich then the company will be having a better solvency.

B. financial manager will also be looking at the ability of the company to raise loans from the market.

C. financial manager of the company will also be looking at the debt equity ratio of the company and if the company is having a higher debt equity ratio than it is having a risk associated with the solvency

D. Financial manager will also be looking at the competitive edge of the company in respect to the industry standards and if the company is having a competitive edge then the company will be successful

E. financial manager should also be looking at the interest coverage ratio and the times interest earned ratio which will be helping in order to determine whether the company is having adequate cash in order to pay off its debt.

F. financial manager will also determine the current ratio along with the Quick ratio in order to determine the liquidity of the company which will be helping him to arrive at whether the company is successful or not