Some considerations on financial indicators
Dear readers, indicators in any area allow us to make an objective analysis of any activity we carry out. In the financial area, these indicators express the economic situation of the company, providing us with some interesting data that allow us to make decisions and effective alternatives to respond to this situation, whether favorable or unfavorable.
In that sense, among the indicators we have those of indebtedness, which refer to the way to measure the degree of financing and the risk that the company has to be able to cover certain financing, according to the above mentioned it can be observed that excellent managers are needed to optimally manage the financial situation of the company, the profitability margins they may have and the levels of the interest rate provided by the financing entities, it is also important to take into account that if you want to have a high indebtedness you should consider that the assets of the company are high enough to be able to cover the credit received.
On the other hand, the National Institute of Public Accountants of Colombia points out that sometimes the companies in charge of providing financing prefer borrowers to have low indebtedness, as an indispensable requirement to be able to provide them with new financing, since this reduces the risk and guarantees that the client has good liquidity, and also points out that it is also necessary to consider whether the financing is short or long term.
There are also liquidity indicators, whose objective is to measure the capacity of companies to cancel their short-term commitments. In short, this indicator shows whether the company is able to cover all its short-term commitments. There are also efficiency indicators, which allow us to know how efficient the company is in terms of the level of execution of the processes carried out, i.e. it takes into account, so to speak, the cost-benefit ratio where it is determined how things were done and how is the performance of the resources used, we would then be focusing on the productivity of the company, with this we could determine whether the return on investment comes from the efficient use of resources or the profit margin that sales produce.
Dear readers, these are just some of the indicators that can be taken into account to determine the financial efficiency of a company. It should be noted that each indicator has several edges that, with the help of some formulas, can provide interesting data to evaluate the company's performance and take the necessary corrective measures in case there is any irregularity in the management of finances.
National Institute of Public Accountants (n.d.). Main financial and management indicators. Colombia.