Financial Dollar Signs & Other Numbers: What's the Bottom
Line?
Liquidity
T
F
N /
A
1.
Collection agencies have filed
or threatened to file lawsuits against our firm.
2.
Tax liens have been filed against
our firm.
3.
We never use the "float"in
our checking account in order to solve our cash flow problem.
4.
Our controller/bookkeeper does
not spend any appreciable time (i.e. more than 2 hours/week) talking
to vendors who are requesting payments.
5.
We are "current"in
all of our withholding taxes and sales taxes.
6.
The average collection period
for our accounts receivable is no more than 50% greater than the
no-discount credit terms we offer.
7.
All of our accounts payable are
being serviced in accordance with the agreed terms; that is, are
being paid in a timely manner.
8.
Financial statements consisting
of at least an income statement, balance sheet, accounts receivable
and accounts payable agings, are prepared monthly and reflect
both the revenue and expenses for the period.
9.
Inventory procedures are in effect
which insure that we accurately know our usable inventory at the
end of the month.
10.
The accounts receivable balance
appearing on our financial statement accurately reflects what
our customers acknowledge they owe, and what they are capable
of paying under the terms of our agreements with them.
11.
Our "cash in bank"account
balance accurately reflects the actual funds in the bank after
all the checks have been written and mailed.
12.
The accounts payable balance
reflected in our financial statement includes all invoices that
have been presented to us for payment, including those which we
may be disputing
Growth & Profitability
T
F
13.
Unit sales volumes (number of
units/hours/tons of merchandise billed) is decreasing.
14.
The company has reported a pretax
profit (excluding extraordinary items) for the proceeding two
years and expects to report a profit this year.
15.
Selling, general and administrative
expenses as a percent of sales are increasing.
16.
The gross profit margin for
our major core products has increased over last year's profit
margin.
17.
Major decisions about new business,
new products, new markets and/or acquisitions reflect a clear
organizational strategy.
18.
The turnover rate of our inventory
( number of turns/year) has improved over last year's results.
Control Systems
T
F
19.
The company has a business plan,
which sets forth the company's strategic and operational objectives,
programs for the ensuing year.
20.
The company operates in accordance
with a budget and cash management system that is consistent with
its objectives; expenditures against the budget are recorded and
monitored. Substantial deviations are periodically analyzed.
21.
The company's sales organization
prepares sales forecasts and its performance against the forecast
is monitored. These forecasts are used to establish inventory
and/or personal levels.
22.
The company has a program to
quantitatively measure customer satisfaction.
23.
Individual responsibilities for
monitoring and achieving financial goals are clearly defined.
Management
The CEO's Leadership
T
F
24.
Our company has a well-defined
mission and set of goals, which is frequently communicated to
our employees. The mission and goals are in writing and a copy
is available.
25.
The chief executive officer
frequently interacts with employees at various levels of the company.
26.
Employees in our company are
well informed as to how well or how poorly the company is meeting
its stated objectives.
27.
Our company lacks resources
(money, equipment, space, personnel) to meet its short-range objectives
and fulfill its contractual obligations.
28.
Major decisions such as organizational
changes, capital appropriations and new facilities are guided
by a formal well-defined approval process.
29.
A single individual has ultimate
responsibility for the company's day-to-day operating decisions.
Key Managers
T
F
30.
All of the managers who report
to me are qualified by education, experience, loyalty, motivation
and competency.
31.
The turnover in management staff
has been greater than 20% per year.
32.
There are employees in the organization
that are being carried because of family relationships, longevity
of service, emotional ties and other non-economic reasons.
33.
I do not believe that the performance
of the firm could be improved by replacing any of the key managers.
The Management/Board
Relationship
T
F
34.
The members of the board of directors
are independent-minded and intelligent businessmen and women whose
education and experience encompasses the technical, financial
and marketing aspects of the industry in which the company operates.
35.
There is a lack of mutual rapport,
trust and respect between the chief executive and the members
of the board of directors.
36.
All of the directors come to
the board meeting prepared to discuss the relevant issues and
participate in a constructive manner.
37.
The owners, or major stockholders
who are active in management and the affairs of the firm, work
very well together; they communicate with each other and in groups,
openly and frankly, and have mutual respect for each others' opinions.
38.
The board of directors and/or
management meetings are very productive, and the key issues affecting
the health and the growth of the company are presented in a professional
manner with adequate analytical data. The issues are thoroughly
discussed, and rational, timely decisions are usually made.
Over-diversification, Over-leverage
and Over-expansion
T
F
39.
The key managers of the company
are able to carry out their responsibilities within the normal
work week and rarely have to work evenings or weekends.
40.
The key functions of the company
are adequately staffed with individuals who have the capability
to handle their responsibilities in the normal day-to-day manner.
41.
The ratio of the company's total
debt to equity increased over the last year.
42.
Debt service (interest plus
principle) as a percent of gross profit, has increased over last
year's figure.
External Factors
Banking Relationships
T
F
43.
We frequently receive calls from
our bank, advising us that our account is overdrawn.
44.
We are current in all of our
interest payments to our bank and are in conformance with all
of the provisions of our loan agreement.
45.
Our banker is friendly, cordial
and cooperative, and is always eager to assist us in any way he
can.
46.
Our banker calls frequently
to inquire about the status of the loan and asks very piercing
and serious questions.
47.
Our banker has inquired about
our willingness to pledge additional collateral (company or personal)
to secure our loans.
Legal Affairs
T
F
48.
Except for collection efforts
being pursued against delinquent accounts receivable, the company
is not involved in any litigation.
49.
Assuming the company is presently
involved in litigation, where it is the defendant, and the "worst
case" scenario should occur, the company would be able to
pay the resulting judgment and still comfortably finance its continuing
operations.
50.
In the case where the company
is involved in a lawsuit where it is the plaintiff, the minimum
expected recovery will exceed the maximum legal cost to be expended.
51.
The chief executive officer
of this company spends more than 10% of his time on the legal
affairs of the corporation, including regulatory and litigation
matters.
Single Customer/Single Vendor
Dependency
T
F
52.
More than 35% of the company's receivables or
inventory is associated with one customer.
53.
In the event the company should
lose a major customer to a competitor, the company could be reorganized
so that profitability was not affected.
54.
In the event the company's major customer filed
bankruptcy, so that all the associated receivables and unique
inventory had to be written off, the resulting write-down of assets
would not jeopardize the requirements of the company's agreements
with its bank.
55.
If any of the company's material
or support service suppliers suddenly went out of business, the
company could easily replace that supplier in a time frame that
would not materially affect sales levels, contractual obligations,
or profitability.
56.
All of the company's existing suppliers are providing
material and services on schedules and of the quality that are
consistent with the company's obligations to its customers.
Changes in Market, Technology
and Environments
T
F
57.
The market for the company's major products and
services is quite soft and we must cut prices frequently to preserve
our market share.
58.
Our company is among the top
four firms (in terms of market share) for the major markets that
we serve.
59.
Our pricing policy is tied to the dominant firm
in our industry and our price increases and decreases frequently
follow their lead
60.
We have, in the ordinary course
of business, been able to replace products that competition and
technology have made obsolete.
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