Published: January 8, 2017
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By: Shawn Barnes, Cal State San Marcos
Hashtags: #Accounting #Analysis #Business #College_to_career #Finance #FinanceDevelopmentProgram #Financial #FinancialPlanning #FinancialServices #Investment #investmentanalysis #reseach #statisticalanalysis #Statistics #Stocks
Assessing the Financial Health of an Organization
Working capital is sometimes used for long-term projects such as expanding facilities, growing the sales force or adding new locations. These necessities that come with running a business can quickly deplete cash. Even stable, profitable companies get into trouble if they run short of money to pay their short-term bills. So my approach to this paper was first to stress the importance of the day to day short-term investments before transitioning to long-term capital investment decisions. I included my thoughts on the difference between IRR vs. NPV for project valuations. I also painted a scenario of the importance of cost of capital and how I could use it in my decision making when evaluating a company. Lastly, while I was researching ideas on how to quickly assess the financial health of an organization I was introduced to the Altman Z-Score which could prove to be useful in determining how close a firm is to bankruptcy. I also wanted to write this paper for myself so that I can revisit it again in the future to add more to it and possibly gain more knowledge.