Diagnosing Financial Health of Business

By Dr. Rajeev Jain

 Liquidity

Debt / Equity Management

Activity or Assets

Management

Diagnosing Financial Health

Profitability

 Market Value

DIGNOSING FINANCIAL HEALTH BY TAKING INTO ACCOUNT LIQUIDITY, ACTIVITY, LEVERAGE, PROFITABILITY AND MARKET VALUE

By Dr. Rajeev Jain1

DIAGNOSING FINANCIAL HEALTH BY TAKING INTO ACCOUNT LIQUIDITY

Liquidity

Current Ratio

Liquidity Ratio

Current Assets

-------------------

Current Liabilities

Liquid Assets

-------------------

Current Liabilities

By Dr. Rajeev Jain1 A

DIAGNOSING FINANCIAL HEALTH BY TAKING INTO ACCOUNT ACTIVITY

Activity Activity or Asset or Asset ManageManage

mentment

OperatiOperating ng

CycleCycle

OperatiOperating ng

CycleCycle

ReceivaReceivable ble

TurnoveTurnoverr

ReceivaReceivable ble

TurnoveTurnoverr

Payable Payable TurnoveTurnove

rr

Payable Payable TurnoveTurnove

rr

Cash Cash ConversConvers

ion ion CycleCycle

Cash Cash ConversConvers

ion ion CycleCycle

Fixed Fixed Assets Assets

TurnoveTurnoverr

Fixed Fixed Assets Assets

TurnoveTurnoverr

ReceivablReceivable in Days e in Days

+ + Inventory Inventory in Daysin Days

ReceivablReceivable in Days e in Days

+ + Inventory Inventory in Daysin Days

PurchasePurchase--------------------------

--Average Average PayablePayable

PurchasePurchase--------------------------

--Average Average PayablePayable

SalesSales--------------------------

--------Average Average

ReceivablReceivablee

SalesSales--------------------------

--------Average Average

ReceivablReceivablee

Cost of Cost of SalesSales

--------------------------------------

Average Average StockStock

Cost of Cost of SalesSales

--------------------------------------

Average Average StockStock

ReceivablReceivable in Days e in Days

+ + Inventory Inventory in Days -in Days -payable payable in Daysin Days

ReceivablReceivable in Days e in Days

+ + Inventory Inventory in Days -in Days -payable payable in Daysin Days

SalesSales--------------------------

------Average Average

Fixed Fixed AssetsAssets

SalesSales--------------------------

------Average Average

Fixed Fixed AssetsAssets

InventoInventory ry

TurnoveTurnoverr

InventoInventory ry

TurnoveTurnoverr

By Dr. Rajeev Jain1 B

DIAGNOSING FINANCIAL HEALTH BY TAKING INTO ACCOUNT PROFITABILITY

Gross Profit ROI

Gross Profit------------ x 100Sales

EBIT----------- x 100Capital Employed

Profitability

Net Profit

Net Profit------------ x 100Sales

By Dr. Rajeev Jain1 C

DIAGNOSING FINANCIAL HEALTH BY TAKING INTO ACCOUNT LEVERAGE

By Dr. Rajeev Jain1 D

DIAGNOSING FINANCIAL HEALTH BY TAKING INTO ACCOUNT MARKET VALUE

Price Earning Ratio

Market Price

-------------------

EPS

Earnings Per

Share

Net Earning----------------

---Number of

Shares

Basic Earnings

Per Share

Net Earning from

Continue Operation + Other Earnings

-------------------

Number of Shares

Dilute Earning

s Per Share

 Market Valu

e

Net Earning from Continue Operation +

Other Earnings

-------------------Diluted

Potential Common

StockBy Dr. Rajeev Jain

1 E

Z-THEORY

By Dr. Rajeev Jain1 F

Z-SCORE A TOOL OF ASSESSING FINANCIAL HEALTH

By Dr. Rajeev Jain1 G

Z-SCORE METHOD FOR ASSESSING FINANCIAL HEALTH

By Dr. Rajeev Jain1 H

Z-SCORE -COMBINATION OF RATIOS

By Dr. Rajeev Jain1 I

Z-SCORE -FINAL OUTCOME

By Dr. Rajeev Jain1 J

PERFORMING TREND ANALYSIS TO DETERMINE FIRM'S ABILITY TO MEET FUTURE OBLIGATIONS

By Dr. Rajeev Jain2 A

Final Outcome of Trend Analysis

Risk Scoring

Risk Mapping

Competitive Pressure

Target ROE

Future Potential

Cross Subsidizat

ion

Performing Trend Analysis

Final Final DecisDecisionion

By Dr. Rajeev Jain2 B

Uncovering Alternative ways to measure Financial Health other than Ratio Analysis

Product Market ChoicesProduct Market

Strategies

Product Market ChoicesProduct Market

Strategies

Measurement Tools

1.Operational Risk Analysis2.SWOT Analysis3.Porter's 5 Score Analysis4.Sensitivity Analysis5.Case Study6.Six Sigma7.ABM8.TQM9.Economic Value Added10.Valuation of Business11.Productivity Measures

Management Goals

Management Goals

Outlook of Sales

Outlook of Sales

Future Access to target

sources of external finance

Future Access to target

sources of external finance

Future need for external

finance

Future need for external

finance

Future Financial and Competitive Performance

Future Financial and Competitive Performance

Investments in Assets to

support Product-Market

strategies

Investments in Assets to

support Product-Market

strategies

Stress test for viability under

various scenarios

Stress test for viability under

various scenarios

Operating, Investing and Financial Plan for Next Year

Operating, Investing and Financial Plan for Next Year

3-5 years Financial Plan

3-5 years Financial Plan

By Dr. Rajeev Jain3

Benchmarking past and current performance to identify the causes That have offset the well being of the company

PAST V/S PAST V/S CURRENTCURRENTPAST V/S PAST V/S CURRENTCURRENT

RESPONSIBILIRESPONSIBILITY TY

ACCOUNTINGACCOUNTING

RESPONSIBILIRESPONSIBILITY TY

ACCOUNTINGACCOUNTING

BASE BASE PARAMETERSPARAMETERS

TARGETSTARGETS

By Dr. Rajeev Jain4

How to Deal with Recession

By Dr. Rajeev Jain5

RECESSION - AFTERMATH

By Dr. Rajeev Jain5 A

By Dr. Rajeev Jain5 B

Remarks