How to interpret a company’s accounts to see if they are financially sound

A company’s balance sheet will give you a snapshot of the firm’s finances at a given time – usually at the end of the last financial year.

Check to see if the assets (what they own) such as stock, cash in hand, properties etc are greater in value than their liabilities such as loans, overdrafts and debts. The assets which can include contracts and orders should be greater than their liabilities.

Always check company identification: the trading name and the legal name, the company number, registered address, the names of company directors and any names of ‘people with significant control.’

Check the credit score – it’s a representation of firm’s creditworthiness. Checkaco rates businesses as A=Excellent, B=Good, C=Fair and D=Poor based on a score out of 100.

Check public records such as legal claims against the business like County Court Judgements at Companies House.

For a glossary of terms you will come across when checking a company’s credit worthiness see https://checkaco.com/testsite/glossary

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