Background Note | HBS Case Collection | November 2010 (Revised May 2012)

Assessing a Company's Future Financial Health

by Thomas R. Piper

Abstract

The case provides students with (1) an understanding of the essence of long-term financial health; (2) familiarity with the calculation and meaning of various financial ratios; and (3) an understanding of the influence of a company's operating and competitive characteristics on its investment in various type assets, on the profitability of these investments, and on the financial structure of its balance sheet. The case also allows a discussion of (1) the incomplete and lagging nature of financial measures; (2) the influence of financial measures on behavior; and (3) the reality that financial analysis often results in better, more focused questions to be asked of management, not conclusive answers.

Keywords: Financial Condition; Forecasting and Prediction; Investment Return; Operations; Competitive Strategy;

Citation:

Piper, Thomas R. "Assessing a Company's Future Financial Health." Harvard Business School Background Note 911-412, November 2010. (Revised May 2012.)