To determine whether a company is successful or in distress, there are several factors that can be evaluated. Most of the time, the success of a company can be merited on how much revenue they are producing on a yearly basis. How many customers they have, how well they connect with their markets, and if they are investing and expanding. On the other hand, if an organization is losing customers, have more expenses than income, and are not competing in the market; they can be deemed to be in distress.
A financial manager can review the organization’s financial statements of the years prior. That way, the manager can analyze and see if revenue has increased or decreased. The financial manager can review their ratios of profitability which takes account of: return on assets, return on equity, and profit margin. Also, reviewing turn over ratios such as inventory turnover and assets turnover can give the financial manager a bigger picture of what is going on in the organization.
McClure, B. (2018, July 25). Financial Ratios to Spot Companies In Financial Distress. Retrieved February 21, 2019, from https://www.investopedia.com/articles/financial-theory/10/spotting-companies-in-financial-distress.asp
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