Inflation in Australia is the highest it has been since the early 1990s. The Australian economy is expected to continue to grow this year, too, so with this highest inflation in place, it’s important to assess the viability of the business.
Business viability refers to a situation in which a business is surviving. This survival is linked to financial position and performance.
We can say a business is viable where:
- It is making a profit and providing a return to the owner with meeting the business obligation.
- It has sufficient cash resources and can sustain itself through a period of no profit.
A business viability assessment will provide a comprehensive business analysis covering key performance indicators such as:
- Gross profit margin analysis by checking the trend and adequacy.
- EBITDA (earnings before interest, taxes, depreciation, and amortization)
- Working capital measurement.
- Debtor analysis – aging and provisions.
- Creditor analysis – terms and trends.
- Forecasts – cash flow Vs. profit.
There are always some indicators of underlying problems which can be addressed if identified early through a business viability assessment tool; we have been helping many of our clients to test their business viability by using the ATO’s business viability assessment tool.
