What impact does the balance sheet have on the creditworthiness of my company?
June 26, 2022 | 40,00 EUR | answered by Christiane Fuchs
Dear tax consultant,
As the managing director of a medium-sized company, I am faced with the challenge of improving the creditworthiness of my company. In our current balance sheet, some key figures such as equity ratio and liquidity ratio are not optimal. This leads to us not being perceived as particularly creditworthy by banks and potential investors.
I am concerned that the poor balance sheet of my company could have long-term negative effects on our financing options. Therefore, I would like to know from you what specific effects the balance sheet has on the creditworthiness of my company and what measures we can take to improve this.
Could you please provide me with tips and recommendations on how we can optimize our balance sheet structure to increase the creditworthiness of our company? For example, would it be wise to invest in long-term assets or reduce short-term liabilities? Are there specific key figures that we should pay particular attention to?
I look forward to your expert advice and thank you in advance for your support.
Best regards,
Quentin Schneider
Dear Mr. Schneider,
Thank you for your inquiry and your trust in my expertise as a tax advisor. The creditworthiness of a company is an important factor for financing options and growth potential. A poor balance sheet structure can indeed have negative effects on creditworthiness, so it is important to take measures to improve it.
The equity ratio and liquidity ratio are two important indicators that banks and investors consider when evaluating a company's creditworthiness. A high equity ratio indicates that the company has enough equity to service long-term liabilities and mitigate potential risks. A high liquidity ratio indicates that the company has enough short-term funds to meet its current obligations.
There are various measures you can take to optimize the balance sheet structure and increase creditworthiness. Investments in long-term assets can help improve the equity ratio and strengthen the company's financial foundation. This can be done, for example, by purchasing assets or real estate that generate long-term income.
Reducing short-term liabilities can also help improve the balance sheet structure. This can be done, for example, by repaying trade credits or converting short-term liabilities into long-term ones. It is important to create a balanced relationship between equity and debt to strengthen creditworthiness.
There are also specific indicators that you should pay special attention to in order to optimize the balance sheet structure. In addition to the equity ratio and liquidity ratio, indicators such as the equity to total capital ratio, debt ratio, or profitability ratios can be important indicators of a company's financial health.
I recommend conducting a detailed analysis of your current balance sheet structure and developing appropriate measures with your tax advisor to improve your company's creditworthiness. Individual solutions and strategies may vary depending on the industry, company size, and goals.
I am happy to assist you with any further questions and provide detailed advice. I hope that my tips and recommendations will help you optimize your balance sheet structure and increase your creditworthiness.
Best regards,
Christiane Fuchs
