As you review your vendors financial health, here are 4 tips to an accurate vendor financial performance assessment.
1. Is your vendor making money?
2. The Net Worth can mislead you.
This is an important area, however, in some large publicly traded companies it could be declining as they’re buying back their treasury shares .... so it may not actually be a negative reflection on their performance!
3. Be sure to review cash and especially the current ratio
Does your vendor show that it has sufficient cash so that it can sustain their operations at current levels?
4. Third party reviews are critical
Look at how outside rating agencies rated your vendor's debt obligations. Be sure to note if the ratings have either been upgraded or downgraded in the past 12 months. Use third party reviews like Moody’s, Standard and Poors together with the Altman Z-Score.