How to Assess the Financial Health of a Company

company healthThe most important thing to do before investing in a company is assessing the financial health of the company. A rational investment is the one that is done after a comprehensive analysis of the financial performance and financial position of the company. Different investors have different goals therefore the assessment differs in accordance with the goals of the investors.

Some investors seek short term gains therefore they are more interesting in holding the stocks in a company for trading rather than for long term. In this case, investors are more interested in the market performance of the shares of the company. On the other hand, some investors seek to invest in a company for a long term. In this case, a deeper evaluation of the financial information of the company is necessary in order to determine whether the company will be able to give out a decent dividend to its investors. Following are the factors that must be considered in both the cases.

Factors to Evaluate In Case of Short Term Investment

For short term investment, the scope of analysis is confined to the market performance of the shares of the company. Different analysts rate the shares of the company to recommend the investors whether they should sell, hold, or buy the shares of a company. These analysts conduct extensive evaluation of the financial health of the company. Some of the factors be consider in this case are listed below: Continue reading