Title: 8 Factors That Determine the Financial Health of a Business
Headings: 8 Factors That Determine the Financial Health of a Business
8 Factors That Determine the Financial Health of a Business
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Excessive or insufficient inventory.
The lowest level of inventory the business can carry.
Accounts receivable.
Net income.
Working capital.
Sales activity.
Fixed assets.
Operating environment.

Content: As they do so, be sure to determine whether the profit figures have been disclosed before or after taxes and the amount of returns the current owner is getting from the business. Also assess how much of the expenses would stay the same, increase, or decrease under your management. Working capital. Working capital is defined as current assets less current liabilities. Without sufficient working capital, a business can’t stay afloat—so one key computation is the ratio of net sales to net working capital. This measures how efficiently the working capital is being used to achieve business objectives. Sales activity. Sales figures may appear rosier than they really are. When studying the rate of growth in sales and earnings, read between the lines to tell if the growth rate is due to increased sales volume or higher prices. Also examine the overall marketplace.