Assessing the Overall Financial Health of Organization

Subject: Finance
Pages: 2
Words: 361
Reading time:
2 min

One of the key indicators of a company’s financial health is the status of its balance sheet. This gives a summary of how cash is being utilized in the firm by illustrating how much the firm actually has, how much the company owes other parties and how much cash the company is actually consuming annually. Companies traded publically often file their information on common websites such as Google and Yahoo. Alternatively, there are always quarterly and annual company reports found on a respective firm’s website. Financial statements also give an important insight into how a company is carrying out its operations.

In other words, it is essential to look at the cash flow statement, the income statement, and the balance sheet which are all important components of financial statements. The balance sheet is advantageous because it highlights how well a firm is managing its assets since the left and right sides contain liabilities and assets; the difference is often an indicator of owner’s equity. Cash flow statements indicate how well a company is utilizing its cash. Also, one can access information concerning a company’s financial health through its conference calls in its quarterly reports. Through this, it is, therefore, possible to analyze how realistic it will be for the firm to continue operating without making money and exhausting its financial resources. This should prudently be two years.

For General Motors, there are a number of signs that show how all is not well with the company. For instance, its percentage change of revenues from previous years for 2008 was -18.3 and from 2007 was -20.7. This indicates that there is indeed a problem if the changes still fall within the negative range. On top of the latter, the company has been closing a series of plants and car dealerships throughout the country in 2009. This is a sign that things are not as they should be for this company. Additionally, the company’s stockholder’s equity is -86,154. This is a strong indication that the firm owes a lot to its creditors and that its financial status has hit the danger zone.