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When a company's performance goes upside-down,
embarking on a financial/operational restructuring
should not be a foregone conclusion. The diverse
objectives of management, the board of directors,
shareholders, and secured and unsecured creditors
can complicate the decision-making process. A
viability analysis conducted by an independent third
party provides the necessary information to determine
whether the company might benefit from a
restructuring - or, if it is beyond the point of
recovery.
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Taking a Company's Pulse |
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In performing a viability analysis, we employ practical
experience and deep operational and financial
knowledge to provide an unbiased, objective opinion
of the causes of the company's downfall. Are they
systemic and therefore impossible to overcome? Has
the core product become obsolete? Are there
localized issues that can be remedied by refocusing
on core strengths and products? We customize each
evaluation for the company and its industry, and
include some or all of the following steps in our
analysis:
Operational Analysis:
- Product Mix: changes impacting profits
and cash
flow.
- Customer Trends: changes in sales
volume,
product mix and gross margins by customer;
customer turnover; customer niches.
- Market Share: changes in competitive
landscape,
industry trends.
- Marketing Strategies: pricing; promotion;
innovation; value add; cost competitive positioning.
- Sales Trends: Order backlog and
pipeline; quality
control and warranty expense trends; geographic
trends.
- Personnel: Sales force changes; sales
and gross
margin by account manager.
- Management tools: Financial reporting;
ratios and
trend analysis; key performance indicators; budgets,
forecasts and projections.
Financial Analysis:
- Financial statements (balance
sheets,
income and cash flow statements): past three to five
years and monthly for previous 12 months.
- Financial ratios and trends (DSOs, DSI,
debt-to-equity): large period-over-period fluctuations;
significant accounting issues; write-offs; adjustments
impacting income/loss, equity, cash flow.
- Asset/working capital management:
accounts
receivable credit and collections management;
inventory turnover by item; gross margin by item;
capital expenditure trends; monitoring;
investment/return analysis.
- Research and development: trends; core
products; return on R&D investments.
- Cost and expense structure: fixed versus
variable
costs; operating leverage; break-even point;
trends.
- Fixed assets: return on assets;
production
capacity; flexibility and efficiency; production cost
trends; fixed cost coverage.
- Loss contingencies: litigation or other
nonrecurring events.
- Accounting policies: conservative vs.
aggressive
practices.
Strategic Analysis (SWOT):
- Internal/core strengths: engineering;
technology; patents; manufacturing; innovation;
research and development.
- Internal weaknesses and risks: capital
structure;
operating leverage.
- Environmental opportunities: new
markets; sales channels; industries; new technology;
geographic diversification.
- Environmental threats and risks:
competitive; economic; capital expenditures
retrenchment; technological; industrial changes.
- Strategic business initiatives and areas of
management focus: consolidation of operations;
potential acquisitions.
Management & Organizational Analysis:
- Personnel: CEO; senior management;
middle management; financial staff (CFO, controller,
accounts payable, etc.).
- Organizational structure: Personnel and
management changes; management depth;
succession planning.
Whether the company has been experiencing a
protracted downturn in performance or you are
questioning its future, it is appropriate to conduct a
viability analysis. Armed with the information gained,
the company's various stakeholders can make an
educated decision on next steps.
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About Brandlin & Associates |
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Brandlin & Associates is an exclusive provider of
investigative accounting, financial consulting and
strategic consulting services. We pride ourselves on
offering superior technical expertise, years of
practical experience and unparalleled service to
decipher financial and operational performance
metrics. As a result, our clients are able to make
informed decisions in a timely manner.
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