Wednesday, June 22, 2011

Sources of Information for evaluation of financial stress faced by companies

There are a number of ways in which an assessment can be made of how likely a company may fail, some using qualitative and some quantitative information.

Identify FIVE (5) sources of information for evaluating the financial stress faced by companies.


(1) Analysis of the company accounts to identify problem relating to key ratios such as liquidity, debt cover and profitability.

(2) Other information in the published accounts, such as:
**very large increases in intangible fixed assets
**a worsening cash and cash equivalents position shown by the cash flow statement
**very large continent liabilities
**important post-balance sheet events

(3) Information in the chairman’s report and the directors’ report (including warnings, evasions. Changes in the composition of the board since last year)

(4) Information in the press (about the industry and the company or its competitors)

(5) Information about environmental or external matters such as changes in the market for the company’s products or services.


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