Business financial health indicators

BUSINESS FINANCIAL HEALTH INDICATORS.
The key stone of any business is its financial health. One of the important tools for evaluating the economic side of business is financial analysis. Maybe you use it yourself, and no doubt you have heard of it. We will advise you on how to set basic indicators of economic health and also incorporate cash flow indicators. 
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Pillars of good condition of the company 

Every business is based on two imaginary economic pillars. A company must offer goods, products, or services that its customers want to buy. The ability not only to offer something, but also to turn it into sales and profits and make money, is a PILLAR OF PERFORMANCE. 
The second pillar is STABILITY, both in terms of assets and finances. In short, there is a need to balance income and expenses well. An economically sound company is one that can pay its liabilities when they are due. Thanks to financial resources and assets, the company can achieve its performance. The services provided on the market make funds for debt payment and purchase of more goods, materials, production equipment, etc. The two pillars are thus interconnected. 
Characteristics of financial health of a company 
If you want to keep track of the economic condition of your company, we recommend that you monitor at least one indicator from the performance pillar and one from the stability pillar. The relationship between own and external resources is a key issue in optimizing the financial structure. What is the optimal ratio? The answer is not quite simple. External money is cheaper than your own. Some indebtedness is desirable because it promotes the return on invested capital. On the other hand, rising debts reduce the company’s financial stability. An indebted company becomes riskier for banks and less suitable for credit granting with good interest rates. In other words, if you do not have debts, you do not bear the risk of their non-payment. If, on the other hand, you want to use external capital, it is advisable to watch the upper limit of the share of debts in total liabilities. In short, debts must not get out of your hand. You can tell if debts have exceeded the tolerable limit by negative equity. This is a strong risk factor that significantly reduces the company’s creditworthiness. 
Too much equity, on the other hand, makes it difficult to achieve potentially higher profitability. What to do about it then? The business owner is the last person who can claim something from a failing company in the event of bankruptcy. Precisely because of this risk, it is safer for business owners to hold only as much equity in the company as the value of fixed assets.