Both Financial and Non-Financial Aspects of the Tendering Company - Research Paper Example

How to Determine the Future Availability/ Stability of a Cladding Company How to Determine the Future Availability/Stability of a Cladding Company Different companies have different strengths in terms of financial and non-financial aspects. For a company or an individual seeking to enter into a contract with another firm for supply of a given material or just a simple maintenance that is going to be needed continuously into the future, there are some considerations that are desired by the supply firm to meet. On the other hand, a company giving out tender seeking the services of the supplying firm should be keen and careful not to award such contract to accompany whose future is so uncertain that by the following year, it might not be in existence no more. In aspects like this, the company might be required to look into the financial ratios of the potential candidate as well as the other financial ratios besides the government regulation requirements of such companies. This paper is going to look at the possible research that a given firm should conduct on a company to be considered for the supply of cladding materials. This will include both financial and non-financial aspects of the tendering company. It will also examine the exact ratios that can shed light on this given issue of concern. Finally, the study will try to examine the implications for the budgeting should a given firm award a contract for the supply of cladding materials and how they could be addressed in an efficient manner. The study will mainly focus on a hygienic cladding company. For that matter, the content of the document may not be generalized to all sectors and all countries, as each country has its regulations governing each industry. However, whatever the difference, it will not be very much big (Tim, 2010). Cladding is a term that is often used to refer to sheeting that covers a building, and this is regardless of whether the area covered is the roof or the wall. Either way it is still cladding although material used nay be different in thickness. The cladding done on the roof is normally made of a steel thicker than the one used on the wall. It is a service that of course will require the best of expertise to perform. For this reason, there is some research that should be done on the company floating its services for such a contract. This may begin by looking at the following qualities from the company; positive comments and recommendations from the customers who have been served by the company. This can be found from the company websites or bloggers tracking such companies. Even a mere googling can yield some results with proper search (Paul, 2005). Then there the gallery of work that also proves a great way of finding out if there is any high valued work the company has ever done. With this, there is proof that at least the company has professionals who know what they are doing and that it is financially stable. In fact, it is said that a company skilled at what they are doing will always flaunt their works. In addition to this, one should be on the lookout for any company seeking to be given some deposits before commencement of the real work. Even though this may not be harmful, it makes an individual to feel secure if the company does not ask for such demands. Most reputable companies will always proceed with work and ask for payments later after the job has been completed as this shows they are financially stable and not money hungry. Other factors to look out for from such companies are whether their services are guaranteed, whether the company is keen to details and that they dont attach some funny, funny terms to their services. This extends to the policies they use for their work like no over cladding or the vice versa. On performance factors of cladding materials, there needs to be integrity of cladding materials. This, however, is very hard to gauge with a bare eye. It all goes back to the company manufacturing the materials as they can be manufactured using poor raw materials leading to poor materials. These normally turn out to be cheap and could be preferred by cladding companies out for nothing less than maximizing profits. High-quality materials are normally expensive but durable when used thereby reducing the frequency of maintenance of either the wall or the roof. For this reason, it is advisable to look at the history of the company to ascertain the quality it used in its past projects as this will help know that the company is also stable financially. High-quality raw materials help in UV stabilization of the cladding while also positively contributing to ease of cleaning. The same implies that the thickness of the cladding should be 2.55mm and above for it to qualify as a high quality. For this reason, the company should probe the bidding company about the thickness of the cladding they will be using should they be given the contract and ensure the exactly what they promise is what they implement. It is also advisable to demand that the cladding should be tested to BSEN438 just so one is sure that the products used on the premise comply with impact resistance level (Tim, 2010). A company willing to perform this obviously is a reputable one. Adhesion integrity of the materials to be used for cladding should also be a matter of concern to the company seeking the services of the cladding company. This is especially true where the major problem is the bacteria that can undermine hygiene performance. Again, for the sake of assurance, it is also advisable to look at the warranty on the installation materials used for both wall and roof cladding. Warranty on the products used by a cladding company although may not be directly related to the certainty of the company being available tomorrow. It, however, gives more certainty on the manufacturers availability that again may not extend to more than 20 years after the date of the purchase. At least even if the cladding company will not be available the following day, just in case, the materials are substandard and or develops some unforeseeable problems, they can always get replaced or serviced for free. Then there is the issue of sustainability achievement. The progress in this area varies with the individual company and the priority and level of investment. Highly sustainable companies are those that have invested in their area of expertise as well as research. This means that such a company will obviously be available in the future considering its high investment about the one with less sustainability policy and investment. In fact, high investment in this symbolizes financial stability. Finally, the company should be checked even with governmental agencies governing such industries, its certificate, and any legal issues relating to its work should also be checked for certainty of the company and surety of its trustworthiness. Financial Aspects Apart from the financial aspects discussed above, one can always research on the future availability of a given cladding company through doing an examination of its financials done from its books. This could be enabled by the help of an audit firm or just the financial reporting of the company. It should, however, be considered that a company may exaggerate, window-dress its books of accounts or even just give a false representation of the same. In brief, relying on financial ratios to determine the stability of a given company in our case, a cladding company may pose the following problems; financial ratios tend to be affected by inflation. A ratio calculated today may not be applicable tomorrow because the value of money will have depreciated or appreciated. Then there is the problem of inability to tell when or the level of liquidity or solvency is appropriate. In fact, it often becomes a problem telling when a given ratio is really bad for business as there are other considerations to be made some of which, it may be the owners who know. A wrong financial statement may yield a wrong financial ratio leading to a wrong conclusion about a certain business. Besides, different businesses may be using different methods of presentation of financial information that may yield different results. Analysis of a company relying on information from such methods may not be entirely accurate. For example, the difference in accounting assumptions like a company using LIFO method and another one using FIFO methods may arrive at different conclusion using the same data. For this reason, it may not be fair only to rely on one method at the expense of the other one. This is also true for calculation of depreciation methods whereby using a straight line method and reducing balance or even double reducing method may give different information with same data (Jewell, 2013). However, ratios are very useful for companies that deal in the same line of product or services. This makes a company dealing in cladding specifically able to rely on financial ratios and hence the possibility to rely on the same to judge them too. Nevertheless, even if this was not the case, still financial ratios can be benchmarked against some factors to provide a clear picture of the company performance. This may include benchmarking it against its past performance to observe the trend. A negative trend in profit may mean the future of the company without some turnaround strategies may be dim. Then there is the analysis of ratios benchmarking it on the aggregate economy. This is reported to help the investigator to ascertain how the company may perform in times of recession whether it will withstand or just fall. Finally, there is the benchmarking against the industry norms. This includes an examination of the performance of other companies in the same industry and comparing the result with the one seeking to get the contract. This may even include past performance of some of the successful companies in the industry to gauge if this one will survive or not for the foreseeable future (Investopedia, 2015). Despite the disadvantages and advantages stated above for using ratios, the following ratios are normally preferred for estimating the future performance of a company. Profitability ratios-these measures the ability of a company to generate profits and revenues for a given period. A company is not making profits will eventually flop since depreciation, and other expenses will be ‘eating into the available inventory. An example is a return on investment which measures the companys profitability according to the invested capital (Chester, 1999). Liquidity ratios- this measures how a firm can be able to pay its short-term financial obligations. The greater the ratio, the better for the company. A company that cant meet its short-term financial obligations may not be able to survive in the future. Examples of such ratios include the current ratio measuring the current company size of assets, accounts receivable turnover ratio Solvency ratios-this, unlike liquidity ratios, will help the investigator to find out if the bidding company can pay its long-term debts and interest and other related obligations well without being affected. A company that cannot meet its long-term obligations may be liquidated, and this will compromise the availability of the same company in future to do repair and servicing of the cladding installations. One example of such ratio to look for is the debt ratio. This ratio should be as small as possible. A bigger one shows how easy it can be for the company to dissolve (Paul, 2015; Peter & Harley, 2015). Where to Get Such Information Most often these companies will be registered by the government of the respective country. Searching for the company in the government database will likely provide a hit. For a quick search, there are websites that keep these data, as the Bloomberg, Capital IQ, Factiva, Edgar website in the United States and Sedar in Canada. These bodies vary with the country. This can also be accessed from the companys website under investor relations, or one can always ask for the same from the company. This will be provided by the accounts department of the company. Impacts on Budgeting Cladding does have an impact on budgeting especially since there is always continuous servicing that will be needed. For this reason, when budgeting, necessary consideration like the cost of servicing will have to be checked as well as inflation effects since this is something that will go on for the next 26 years. The best way to go about this is to be proactive by discounting this values and putting them in the budget with allowance for any variations. Bibliography Chester, B., 1999. An examination of service related antecedents to retail store performance.. Journal of organization behaviour, pp. 943-963. Investopedia, 2015. Financial Ratios,there Uses and Limitations. [Online] [Accessed 9th October 2015]. Jewell, R., 2013. Limitations of Financial Ratios. [Online] Available at: http://ratioprofessor.com/limitations-of-financial-ratios/ [Accessed 9th October 2015]. Paul, B., 2015. Measuring Busines Financial Strength.. [Online] Available at: http://www.pinnacle-business.com/newsletter/Financial%20Review%20By%20Pinnacle%Consultants%20042611.htm?ref=theredish.com/web [Accessed 9th August 2015]. Paul, M., 2005. The impact of office design on business performance. London: Commission for architecture and Built environment. Peter, S. & Harley, J., 2015. Dummies.com: How to invest. [Online] Available at: http://m.dummies.com/how-to/content/financial-strength-ratios-for-investment-analysis.html [Accessed 9th August 2015]. Tim, W., 2010. Factors Affecting Performance of Hygienic Wall Cladding. Altro Whiterock. Read More