This assessment evaluates a business's financial health across six critical dimensions: liquidity and cash position, profitability and margins, operating efficiency, leverage and debt management, growth trajectory, and financial controls and reporting quality. The output identifies whether the business is financially resilient or approaching distress, and routes to specific improvement strategies. [src1]
What this measures: Ability to meet short-term obligations and maintain adequate cash reserves.
| Score | Level | Description | Evidence |
|---|---|---|---|
| 1 | Ad hoc | Cash crises frequent; current ratio below 1.0; no forecasting | Operating on overdraft; <1 month expenses; AR unmanaged |
| 2 | Emerging | Current ratio 1.0-1.2; 1-2 months cash; basic tracking | Cash monitored weekly; thin runway; seasonal gaps |
| 3 | Defined | Current ratio 1.3-1.8; 3-6 months cash; 13-week forecast | Weekly forecast; managed AR/AP; DSO benchmarked |
| 4 | Managed | Current ratio 1.5-2.5; 6-12 months cash; scenario modeling | Multiple scenarios; cash conversion optimized; treasury active |
| 5 | Optimized | Optimal liquidity; real-time visibility; AI cash forecasting | 95%+ forecast accuracy; multi-entity visibility; zero shortfalls |
Red flags: Current ratio below 1.0; no forecast; payroll delayed; vendors past 60 days; credit line fully drawn. [src2]
Quick diagnostic question: "What is your current and quick ratio, and how many months of expenses can you cover from cash?"
What this measures: Whether the business generates adequate profit at each level relative to industry.
| Score | Level | Description | Evidence |
|---|---|---|---|
| 1 | Ad hoc | Negative net income; no profitability path; gross below industry floor | Cash burn with no timeline; below 25th percentile; unit economics negative |
| 2 | Emerging | Gross at industry average; operating/net negative; break-even established | Gross acceptable; operating losses; net margin narrowing; timeline exists |
| 3 | Defined | Gross above median; operating and net positive; improving trend | Above 50th percentile; positive 4+ quarters; margin improvement visible |
| 4 | Managed | All margins above median; operating leverage visible; strong unit economics | Revenue growing faster than costs; CAC payback on target; contribution by segment |
| 5 | Optimized | Best-in-class margins; pricing power; competitive advantage in margins | Top quartile; pricing power proven; sustainable advantage |
Red flags: Gross margin declining YoY; losses widening; pricing pressure; no contribution analysis. [src1]
Quick diagnostic question: "What are your gross, operating, and net margins vs industry benchmarks?"
What this measures: How efficiently resources convert into revenue and profit.
| Score | Level | Description | Evidence |
|---|---|---|---|
| 1 | Ad hoc | No efficiency metrics; revenue per employee unknown; no budget analysis | No KPIs; budget overruns; overhead unknown |
| 2 | Emerging | Basic metrics tracked; quarterly budget review; some cost visibility | Revenue per employee known; quarterly review; SG&A monitored |
| 3 | Defined | KPIs benchmarked; monthly variance analysis; utilization tracked | Benchmarked; monthly P&L by dept; SG&A improving |
| 4 | Managed | Optimization programs; driver-based budgeting; real-time utilization | ZBB or driver-based; real-time dashboards; board reporting |
| 5 | Optimized | AI-optimized allocation; predictive models; best-in-class leverage | AI recommendations; top-quartile efficiency; sustained advantage |
Red flags: Revenue per employee declining; SG&A growing faster than revenue; no budget analysis. [src4]
Quick diagnostic question: "What is revenue per employee, and how does SG&A as % of revenue trend over 3 years?"
What this measures: Debt sustainability, servicing capacity, and capital structure appropriateness.
| Score | Level | Description | Evidence |
|---|---|---|---|
| 1 | Ad hoc | D/E above 3.0; interest coverage below 1.5; covenant risk | Overleveraged; struggling with interest; covenant violations possible |
| 2 | Emerging | D/E 2.0-3.0; coverage 1.5-2.5; manageable but constraining | Debt serviced but constrains investment; no active management |
| 3 | Defined | D/E 1.0-2.0; coverage above 3.0; covenants comfortable; annual review | Industry-appropriate levels; headroom; WACC calculated |
| 4 | Managed | D/E optimized; coverage above 5.0; active portfolio management | Maturity profile managed; hedging active; credit rating maintained |
| 5 | Optimized | Best-in-class structure; investment-grade; stress-tested | Optimal leverage modeled; zero unplanned breaches; strategic use |
Red flags: D/E above 3.0; interest coverage below 2.0; covenant violations in 12 months; revolver drawn for operations. [src3]
Quick diagnostic question: "What is your debt-to-equity and interest coverage, and are covenants comfortably met?"
What this measures: Revenue growth sustainability, diversification, and capital efficiency.
| Score | Level | Description | Evidence |
|---|---|---|---|
| 1 | Ad hoc | Revenue declining; no growth strategy; top 3 customers >40% | Declining YoY; no growth plan; dangerous concentration |
| 2 | Emerging | Below-average growth; existing customers only; concentration improving | Below median; NRR positive but weak new logo; inconsistent growth |
| 3 | Defined | At or above average; balanced expansion and new; diversified base | At/above median; both NRR and new logo contributing; top 3 below 20% |
| 4 | Managed | Significantly above industry; multiple engines; market expansion | Top quartile; multiple products/markets; ROIC measured |
| 5 | Optimized | Best-in-class sustained growth; network effects; market expanding | 3+ years leading; competitive moats; capital efficiency improving |
Red flags: Revenue declining YoY; one customer >30%; below median 2+ years; growth from pricing only. [src5]
Quick diagnostic question: "What is revenue growth, and how much is expansion vs new customers?"
What this measures: Reliability and timeliness of financial reporting and internal controls.
| Score | Level | Description | Evidence |
|---|---|---|---|
| 1 | Ad hoc | Close takes 30+ days; no controls; unreliable statements; no budget | No monthly close; no reconciliations; spreadsheet-based; no audit |
| 2 | Emerging | Close within 15-20 days; basic controls; annual budget | Monthly close exists but slow; basic reconciliations; no external audit |
| 3 | Defined | Close within 10 days; SOX-like controls; audited; rolling forecast | Close <10 days; documented controls; annual audit; 12-month forecast |
| 4 | Managed | Close within 5 days; robust controls; board-quality reporting; FP&A | Close <5 days; tested controls; board package; FP&A partners with business |
| 5 | Optimized | Continuous close; AI anomaly detection; real-time visibility | Near-real-time close; AI flags anomalies; predictive models; zero weaknesses |
Red flags: Close exceeds 15 days; no reconciliations; spreadsheets without controls; no external audit. [src6]
Quick diagnostic question: "How many days does your monthly close take, and when was the last external audit?"
Overall Score = (Liquidity + Profitability + Efficiency + Leverage + Growth + Controls) / 6| Overall Score | Maturity Level | Interpretation | Next Step |
|---|---|---|---|
| 1.0 - 1.9 | Critical | Financial distress signals; immediate intervention required | Emergency cash management; turnaround advisor; restructure debt |
| 2.0 - 2.9 | Developing | Vulnerabilities present; growth constrained by financial weakness | Address liquidity; implement budgeting; optimize working capital |
| 3.0 - 3.9 | Competent | Solid health with optimization room; fundable and scalable | Optimize capital structure; rolling forecasts; FP&A capability |
| 4.0 - 4.5 | Advanced | Strong health; ready for growth or opportunity | Efficiency fine-tuning; strategic debt; predictive models |
| 4.6 - 5.0 | Best-in-class | Exceptional health; competitive advantage through financial discipline | Deploy capital strategically; M&A from strength |
| Weak Dimension (Score < 3) | Fetch This Card |
|---|---|
| Liquidity & Cash | Liquidity deep-dive |
| Profitability | Margin analysis deep-dive |
| Operating Efficiency | Efficiency deep-dive |
| Leverage | Capital structure deep-dive |
| Segment | Expected Average | "Good" Threshold | "Alarm" Threshold |
|---|---|---|---|
| Pre-revenue startup | 1.3 | 2.0 | 0.8 |
| Early revenue (<$5M) | 2.0 | 2.8 | 1.3 |
| Growth ($5M-$50M) | 2.8 | 3.5 | 2.0 |
| Scale ($50M-$500M) | 3.5 | 4.0 | 2.8 |
| Enterprise ($500M+) | 3.8 | 4.3 | 3.2 |
[src3]
Fetch when a user asks to evaluate financial health, diagnose why a profitable company has cash flow problems, prepare for fundraising or M&A due diligence, or assess whether the business can sustain its growth rate.