When it comes to trying to secure a selection of investors, you’ll find that a lot of high profile investors will always look for the same kinds of things when they’re checking over your metrics. However, knowing what they’re looking for is vital knowledge, so that you can make decisions based on this knowledge. We’re going to be taking a look at what it is that investors are looking for in your financial metrics.
Liquidity On Your Balance Sheet
One of the first things which investors will look for is liquidity on your balance sheet. For those of you who don’t quite understand what we’re talking about, look at it this way. What investors want to know is whether you have the cash required to cover everything over the next year. They want to know whether you’ll have enough to cover everything which happens in the standard year, or whether you’re going to over-exert and overspend within a few months, and whether you’ve gained so much short-term debt that you’ll be broke before the year is out. This is something which an investor will take particular note of, as they want to know there’s a good chance they’ll get their investment back eventually.
To find this, you’ll see that investors will look at your current ratio. It is a comparison of the current assets which you hold and is one of the most critical things which an investor will look at. They’ll be doing this by taking a look at the ratio, and they’re hoping to see a 2:1 ratio. This is the ratio of liquidity to debt.
The Growth Of Your Earnings
Another important factor which investors will concern themselves with is whether or not your company is going to be growing over the years. To find this, they’ll be looking at the company when it started and checking to make sure that both your sales have grown, and that your net income has also increased to match that. Most investors are only concerned with investing in growing companies, and those who have stagnated or are losing money each year are going to find it harder to secure investors.
They’ll also be looking at how much cash you have at the moment. Investors want to know that you’re financially secure and that you can afford to overcome any issues which you may encounter during the business year. This means that you won’t go under or collapse when things get rough and that their investments are protected.
Overall, these are just a few of the things which an investor will look for in your financial metrics. Investors want to know that you can survive the next business year and that you’re going to keep on growing. Their decision about whether your company or business is a wise investment or not will depend on what they find within these metrics. An ideal company will be increasing, have little short-term debt and a good liquidity on their balance sheet, so it’s worth keeping that in mind.