Company Health Index

Answer each question either True or False.
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These asterisked questions were designed to identify life-threatening conditions within the company.

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Your score is:

These asterisked questions were designed to identify life-threatening conditions within the company. Accumulating any points for these questions indicates your business is experiencing very serious problems. We strongly recomend you complete the remainder of the questions.

Level One: You Passed the Physical (Scores 0 to 20 and no points on asterisked questions)

Your business is probably in top condition. If you scored in this range, your company appears to be operating smoothly. The key elements necessary to ensure survival and continuity, and to deal with future uncertainties, are in place. This is not to say that you do not have any areas of vulnerability--every business does--but most aspects of the business seem to be under control.

Level Two: Your Business Is Running a Fever (Scores 20 to 50 or any points on asterisked questions)

No need to panic, but if you scored in this range, your company has some serious problems that must be addressed immediately. Your firm is vulnerable to any number of factors or events that could leave your company in a downward spiral. This score demonstrates that some serious issues are simply not being addressed. Your firm needs a plan to stop the deterioration and turn the company around. If you could deal with your problems internally, you probably would already have done so.

Level Three: Surgery Is Indicated (Scores 51 and above)

This is an emergency alert if you scored in this range, your company is already in a tailspin and is a candidate for the bankruptcy court. The deterioration has advanced to the point where the very existence of the firm may be in doubt. The personal equity of owners and managers who have guaranteed bank loans is in jeopardy. In order to preserve the business and the assets of the firm you must take immediate action to secure help.

Financial

Dollar signs and other numbers: what's the bottome line?


		Liquidity	True	False
	1.	Collection agencies have filed or threatened to file lawsuits against our firm.
*	2.	Tax Liens have been filed against our firm.
	3.	We never use the "float" in our checking account in order to solve our cash flow problem.
	4.	Our controller or bookkeeper does not spend any appreciable time (that is, more than two hours per week) talking to vendors who are requesting payments.
*	5.	We are current in all of our withholding taxes and sales taxes.
	6.	The average collection period for our accounts receivable is no more than 50 percent greater than the no-discount credit terms we offer.
	7.	All of our accounts payable are being serviced in accordance with the agreed terms, that is, paid in a timely manner.
	8.	Financial statements consisting of at least an income statement, a balance sheet, and accounts receivable and accounts payable aging are prepared monthly and reflect both the revenue and the expenses for the period.
*	9.	Inventory procedures are in effect which ensure that we have an accurate account of our usable inventory at the end of the month.
*	10.	The accounts receivable balance appearing on our financial statement accurately reflects what our customers acknowledge they owe, and what they are capable of paying under the terms of our agreement with them.
	11.	Our cash-in-bank account balance accurately reflects the actual funds in the bank after all the checks have been written and mailed.
	12.	The accounts payable balance reflected in our financial statement includes all invoices that have been presented to us for payment including those that we may be disputing.
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		Growth and Profitability	True	False
	13.	Unit sales volume (number of units, hours, or tons of merchandise billed) is decreasing.
	14.	The company has reported a pretax profit (excluding extraordinary items) for the preceding two years and expects to report a profit this year.
	15.	Sales, general and administrative expenses as a percentage of sales are increasing.
	16.	The gross profit margin for our core products has increased over last year's profit margin.
	17.	Major decisions about new business, new products, new markets, and acquisitions reflect a clear organizational strategy.
	18.	The turnover rate of our inventory (number of turns per year) has improved over last year's results.
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		Control Systems	True	False
	19.	The company has a business plan that sets forth the company's strategic and operational objectives and programs for the ensuing year.
*	20.	The Company operates in accordance with a budget and cash management system that is consistent with its objectives. Expenditures against the budget are recorded and monitored. Substantial deviations am analyzed periodically.
*	21.	The Company's sales organization prepares sales forecasts, and its performance against the forecast is monitored. These forecasts are used to establish inventory and personnel levels.
	22.	The company has a program to quantitatively measure customer satisfaction.
	23.	Individual responsibilities for monitoring and achieving financial goals are clearly define.
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Management

Is it multiplying or dividing in your business equation?


		The CEO's Leadership	True	False
	24.	Our company has a well-defined mission and set of goals, which are frequently communicated to our employees. The mission and goals are in writing and a copy is available.
	25.	The chief executive officer frequently interacts with employees at various levels of the company.
	26.	Employees in our company are well informed as to how well or how poorly the company is meeting its stated objectives.
*	27.	Our Company lacks resources (money, equipment, space, personnel) to meet is short-range objectives and fulfills its contractual obligations.
	28.	Major decisions, such as organizational changes, capital appropriations, and new facilities, are guided by a formal well-defined approval process.
	29.	A single individual has ultimate responsibility for the company's day-to-day operating decisions.
* * *
		Key Managers	True	False
	30.	All of the managers who report to me are qualified by education, experience, loyalty, motivation, and competence.
	31.	The turnover in management staff has been greater than 20 percent per year.
	32.	There are employees in the organization who are being carried because of family relationships, longevity of service, emotional ties, or other non-economic reasons.
	33.	I do not believe that the performance of the firm could be improved by replacing any of the key managers.
* * *
		The Management - Board Relationship	True	False
	34.	The members of the board of directors are independent-minded and intelligent business people whose education and experience encompass the technical financial, and marketing aspects of the industry in which the company operates.
	35.	There is a lack of mutual rapport, trust, and respect between the chief executive and the member of the board of directors.
	36.	All of the directors come to the board meeting prepared to discuss relevant issues and participate in a constructive manner.
	37.	The owners or the major stockholders who are active in management work very well together. They comununicate with each other and in groups, openly and frankly, and have mutual respect for each others' opinions.
	38.	The board of directors or management meetings are productive, and the issues affecting the health and growth of the company are presented in a professional manner with adequate analytical data. The issues are discussed thoroughly, and rational, timely decisions are usually made.
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		Overdiversification, Overleverage, Overexpansion	True	False
	39.	The key managers of the company are able to carry out their responsibilities within the normal workweek and rarely have to work evenings or weekends.
	40.	The key areas of the company are adequately staffed with individuals who have the capability to handle their responsibilities in normal day-to-day manner.
	41.	The ration of the company's total debt to equity increased over the past year.
	42.	Debt service (interest plus principal) as a percentage of gross profit has increased over last year's figure.
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External Factors

Business affairs: love at first sight, but a second glance


		Banking Relationship	True	False
	43.	We frequently receive calls from our bank, advising us that or account is overdrawn.
*	44.	We are current in all of our interest payments to our bank and are in conformance with all of the provisions of our loan agreement.
	45.	Our banker is friendly, cordial, and cooperative, and is always eager to assist us in any way he can.
	46.	Our banker calls frequently to inquire about the status of the loan and asks very piercing and serious questions.
	47.	Our banker has inquired about our willingness to pledge additional collateral (company or personal) to secure our loans.
	48.	Except for collection efforts being pursued against delinquent accounts receivable, the company is not involved in any litigation.
* * *
		Legal Affairs	True	False
*	49.	Assuming the company is presently involved in litigation where it is the defendant and the worst-case scenario should occur, the company would be able to pay the resulting judgment and still comfortably finance its continuing operations.
	50.	If the company is involved in a lawsuit where it is the plaintiff, the minimum expected recovery will exceed the maximum legal cost to be expended.
	51.	The chief executive officer of the company spends more than 10 percent of his time on the legal affairs of the corporation, including regulatory and litigation matters.
* * *
		Single Customer - Single Vendor Dependence	True	False
	52.	More than 35 percent of the company's receivables or inventory is associated with one customer.
*	53.	In the event the company should lose a major customer to a competitor, the company could be reorganized so that profitability was not affected.
	54.	In the event the company's major customer filed for bankruptcy, so that all the associated receivables and unique inventory had to be written off, the resulting write-down of assets would not jeopardize the requirements of the company's agreements with its bank.
	55.	If any one of the company's material or support service suppliers suddenly went out of business, the company could easily replace that supplier in a time frame that would not materially affect sales levels, contractual obligations, or profitability.
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		Changes in Market, Technology, and Environment	True	False
	56.	All of the company's existing suppliers are providing material and services on schedule and of the quality that is consistent with the company's obligations to its customers.
	57.	The market for the company's major products and services is quite soft, and we must cut prices frequently to preserve our market share.
	58.	Our company is among the top four firms (in terms of market share) in the major markets that we serve.
	59.	Our pricing policy is tied to the dominant firm in our industry, and our price increases and decreases frequently follow its lead.
	60.	We have, in the ordinary course of business, been able to replace products that competition and technology have made obsolete.
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