Financial Analysis Concepts
Columbia Southern University
Financial Management
Financial Analysis Concepts
As a financial analyst there are many aspects that need to be evaluated when taking over
new, smaller companies. It is important to understand the company’s financial situation before
taking over. Their finances will and do affect the overall financial situation of the larger
company. Understanding things like credit scores, inflations rates, interest rates, etc. will be
valuable when deciding which, if any, companies we should acquire.
A credit score is a number that is generated to illustrate how reliable a company can be
when paying back debts. This is an important factor to evaluate because it is important to be
aware of the company’s ability to pay back their loans and other debts. If a company has a low
credit score, they more than likely are not making enough money to pay these loans, or are not
financially responsible enough to pay them, or are spending way outside of their means. In any
situation, a bad or low credit score is a bad thing. Also, when evaluating credit scores, for a
business, low credit scores can and will deter investors from lending, therefore you could
potentially lose all of the investment money that is needed to function. It is important to ensure
that business that are being considered for acquisition are financially stable and have a decent
enough credit score to even be profitable and investable.
The firm should borrow on a long-term basis when trying to acquire a business. Long-
term borrowing would give the firm a lower interest rate than if they chose a short-term option.
Also, by using a long-term loan, it frees up some finance risk so that they are able to borrow
money for other things if necessary. It also is more common for people and businesses to use
Columbia Southern University
Financial Management
Financial Analysis Concepts
As a financial analyst there are many aspects that need to be evaluated when taking over
new, smaller companies. It is important to understand the company’s financial situation before
taking over. Their finances will and do affect the overall financial situation of the larger
company. Understanding things like credit scores, inflations rates, interest rates, etc. will be
valuable when deciding which, if any, companies we should acquire.
A credit score is a number that is generated to illustrate how reliable a company can be
when paying back debts. This is an important factor to evaluate because it is important to be
aware of the company’s ability to pay back their loans and other debts. If a company has a low
credit score, they more than likely are not making enough money to pay these loans, or are not
financially responsible enough to pay them, or are spending way outside of their means. In any
situation, a bad or low credit score is a bad thing. Also, when evaluating credit scores, for a
business, low credit scores can and will deter investors from lending, therefore you could
potentially lose all of the investment money that is needed to function. It is important to ensure
that business that are being considered for acquisition are financially stable and have a decent
enough credit score to even be profitable and investable.
The firm should borrow on a long-term basis when trying to acquire a business. Long-
term borrowing would give the firm a lower interest rate than if they chose a short-term option.
Also, by using a long-term loan, it frees up some finance risk so that they are able to borrow
money for other things if necessary. It also is more common for people and businesses to use
