This is because they determine the sustenance of the business in the market-mix. Conclusion. What Does Business Viability Mean? The viability statement is about the company’s ability to manage plausible “what-if” scenarios, not whether the company can avoid liquidation in a given time period (see page 2). Analysis. The company’s long-term financial goals represent its commitment to a strategy that is innovative, updated, unique, value-driven, and superior to those of competitors. It factors in target markets, competition, sourcing and overall financial potential. The creation of a business plan will help you determine if your business is viable. A forensic accountant will therefore consider the sufficiency and quality of the financial documents it reviews to inform an opinion on the solvency of the company and financial viability of the business. The balance sheet is a statement that shows a company’s financial position at a specific point in time. Analyze the Balance Sheet. These ratios are used not only to evaluate the financial viability of your business, but are essential in comparing your business to others in your industry. Viability assessment can cover a broad area. Inadequate financial resources can place considerable pressure on a company’s viability, whether in growth mode or a turnaround scenario. Viability measures your business’ ability to start, grow and survive. Ultimately, a viable business is either: This third step is an analysis of the firm’s business trends, external opportunities, internal resources, and core competencies. This means that your business should have twice the amount of assets that it does liabilities. If your company ever needs to borrow money through a small business loan, for example, lenders usually want to see a statement of financial stability that shows that your business has sufficient cash flow and isn't heavily indebted already. How to Determine the Financial Health of a Company 1. Another thing that is important to understand is the difference between business viability and business solvency. Measures of Financial Viability: None of the above measures will, on their own, provide a definitive indication of a venue’s financial viability – they need to be considered together to obtain a complete picture. You can also look for trends in your company by comparing the ratios over a certain number of years. 3. Simply, viability in a business sense is the ability to survive. To get an idea of the company’s anticipated returns and future financial needs, ask the business owner and/or accountant to show you projected financial statements for the business… Capital investment requirements, break even analysis, cash flow projections, profitability of the business have to be analyzed. Its more subjective nature makes the supporting narrative an essential accompaniment to the statement . There is no one determinative factor which determines whether a business is a financially viable and whether a company is insolvent. Solvency is when a business has enough assets to cover its liabilities. It provides a snapshot of its assets, liabilities, and owners’ equity. The initial focus of the financial viability assessment is the audited financial statements for the previous financial year. The assessment of financial viability is an integrated process involving a review of the audited financial statements, financial performance report, business plan and other information that supports our financial analysis. • Financial viability: The assessment of financial viability is of significant importance when looking at the viability of the business. Briefly, this can include the analysis of Market and Product Viability, Management Viability and most important of all Financial Viability. This usually means that the assets to liabilities ratio will be 2:1. Consider the steps below a business viability test for your idea. Financial stability is also important to lenders, business partners and investors.