MONEY
By Ted Rose
C
ompanies around the country and world are long term assets. These transactions have a similar
taking the necessary steps to realign their impact of increasing cash reserves while enhancing
business models with the changing market envi- working capital and reducing debt to equity ratios.
ronment. It is during these times of change that
companies must take dramatic steps to strengthen
The best time for a company to enter into new or
their balance sheets and extend their runways. To
expanded equity or debt arrangement is while
effectively navigate these challenging times, com-
their financial trends are still positive. Having
panies need to ensure that their financial and man-
accurate and complete annual financial projections
agement systems are providing them with accurate
will help companies predict their expected cash
and relevant financial and non-financial informa-
requirements for a given year and provide them
tion on a timely basis. This information needs to be
time to attract the necessary capital. During
evaluated routinely to ensure that management is
uncertain times, it is critical to consider expanding
fully informed as to the financial condition of the
the round of financing to cover unexpected events
company and to assist management in making
or potential gaps in a plan. In today’s environment,
informed decisions on how to correct downward
much of an entity’s intangible assets are tied up in
trends on a timely basis. While it is important that
their staff’s know-how and experience. To protect
management not overreact to bad news, it is criti-
intangible assets, companies need to ensure
cal that they factor in this information into decision
they can keep their key employees retained and
making to avoid larger losses downstream.
engaged. Without this continuity, a company will
lose valuable time during the economic recovery
period.
While a strong top line and bottom line are
important, during tough markets the strength of Strengthen Your Balance Sheet
a firm’s balance sheet will determine how much
adversity a firm can withstand before it is forced
• Reducing dividends and distributions
to close its doors. This is why many firms have
• Liquidating non-productive, long-term assets
begun the process of strengthening their balance
sheets by limiting or eliminating their dividends
• Expand equity and access to debt to extend
and distributions. This allows the firm to build up
runway
cash reserves while enhancing working capital and
• Ensure continuity of intangibles by keeping
reducing their debt to equity ratios. While some
your best people engaged
shareholders may have come to depend on these
payments, this type of reduction generally does During tough times, companies need to work
not have a significant impact on the intrinsic value harder to maintain and grow their top lines.
of on organization. Companies have also begun A steady flow of new business is essential in
to divest themselves of non-core, non-productive, maintaining market share. While all activities need
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