Assessing a Company's Future Financil Health

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9-911-412 R E V: MAY 2 8 , 2 0 1 2 ________________________________________________________________________________________________________________ Professor Thomas Piper prepared the original version of this note, “Assessing a Firm’s Future Financial Health,” HBS No. 201-077, which is being replaced by this version prepared by the same author. This note was prepared as the basis for class discussion. Copyright © 2010, 2011, 2012 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1- 800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced,…show more content…
The remainder of this note discusses each of the steps in the process and then provides an exercise on the various financial measures that are useful as part of the analysis. The final section of the note demonstrates the relationship between a firm’s strategy and operating characteristics; and its financial characteristics. This document is authorized for use only by Ruijuan He (heruijuann@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. 911-412 Assessing a Company’s Future Financial Health 2 Figure AThe Corporate Financial System Analyze Goals Step 1 Strategy Market, Competitive Technology Regulatory and Operating Characteristics Step 2 Analyze Revenue Outlook  growth rate  volatility, predictability Step 3 Step 4 Analyze Investment in Assets Assess Economic Performance  to support growth  profitability  improvement/deterioration in asset management  cash flow  volatility, predictability Step 5 Step 6 Assess External Financing Need Ensure Access to Target Sources of Finance  $ amount  lending/investing criteria  timing, duration  deferability  attractiveness of firm to each target source Step 7 Assess Viability of 3 to 5-year Plan  consistency with goals  achievable operating plan  achievable financing plan Step 8 Perform Stress Test for Viability Under

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