Question

Please provide a two-paragraph response to the following question:

4. What information do you need to project an agency’s future financial stability?

Answer 1

The approach beneficial for determining financial stability would be a top-down approach. Macro perspective like how the economic growth (GDP) figures are, how the sector or industry is performing/ growing, the perspective if consumers for the particular product & services, will determine the top-line figures, the growth estimate to forecast.

The next part would be to focus on agency-specific parameters like debt taken as compared total capital structure, the profitability the company is generating, ease with which the agency is able to achieve short and long term obligations, activity ratios and the other such parameters to be seen in comparables to that of comparable agencies in the same line of business. The dividend policy the agency is following adds a great deal in financial stability, as it gives various signals to the potential stakeholders.