How can I optimize my balance sheet structure?
May 20, 2023 | 50,00 EUR | answered by Christiane Fuchs
Dear tax advisor,
My name is Dietrich Ziegler and I am the owner of a medium-sized company in the automotive industry. In recent years, my company has developed well and we have been able to generate solid profits. However, I have noticed that our balance sheet structure is not optimal and this could potentially cause future financing problems.
The current situation shows that we have a high proportion of short-term liabilities that we need to regularly service. At the same time, we have a low equity ratio, which makes banks skeptical when it comes to lending. Additionally, we have made some long-term investments that will only pay off in the coming years.
My concerns are that the current balance sheet structure could limit our growth potential and make it difficult to find favorable financing options in the future. I would like to know how I can optimize my balance sheet structure to remain financially stable and competitive in the long term.
What measures could I take to reduce the proportion of short-term liabilities and increase the equity ratio? Are there ways to finance long-term investments better without jeopardizing liquidity? How can I make my balance sheet more transparent and convince potential investors or business partners of the stability of my company?
I look forward to your professional advice and thank you in advance for your support.
Sincerely,
Dietrich Ziegler
Dear Mr. Ziegler,
Thank you for your trust and your inquiry regarding the optimization of your balance sheet structure. It is very good that you are addressing this issue early on to avoid potential financing problems in the future and to keep your company stable and competitive in the long term.
There are various measures you can take to reduce the share of short-term liabilities and increase the equity ratio. First of all, you should consider whether it is possible to replace some of your short-term liabilities with long-term financing. This can help improve your company's liquidity situation and reduce dependence on short-term payment obligations.
Furthermore, you should consider whether it is possible to increase the equity ratio by converting debt into equity. This can be done, for example, through a capital increase or the contribution of equity by the shareholders. A higher equity ratio signals to banks and potential investors that your company is solidly financed and better prepared for potential financial challenges.
To better finance long-term investments without jeopardizing liquidity, you could consider alternative financing options such as leasing or factoring. These financing instruments allow you to make long-term investments without having to raise large sums of money immediately. This can help preserve your liquidity while advancing your investments.
In order to make your balance sheet more transparent and convince potential investors or business partners of the stability of your company, it is important to provide clear and meaningful reporting. Ensure that your balance sheet and profit and loss statement are clear and understandable and include all relevant key figures. Also, show what measures you have already taken to improve the balance sheet structure and how these have had a positive impact on your financial situation.
I hope this information is helpful to you and provides you with some ideas on how to optimize your balance sheet structure. If you have any further questions or need assistance, I am happy to help.
Best regards,
Christiane Fuchs
