Gartner Research

Reduce Vendor Management Risk by Analyzing the Balance Sheet of Strategic Vendors

Published: 24 November 2015

ID: G00291284

Analyst(s): Gary Spivak

Summary

Understanding the financial viability of vendors and their ability to service debts and fund investments must be part of vendor risk management. To minimize the risk of vendor failure and obsolescence, IT vendor management leaders must review their balance sheets and plan for alternatives.

Table Of Contents
  • Key Challenges

Introduction

Analysis

  • Evaluate Your Vendors' and Service Providers' Financial Health
    • What Is the Balance Sheet?
  • Analyze the Company's Assets to Gauge How Readily They Can Be Converted Into Cash
    • Assets
    • Cash
    • Accounts Receivable
    • Inventory
    • Current Assets
    • Noncurrent Assets
  • Identify the Company's Liabilities to Gauge Its Obligations and Its Ability to Meet Them
    • Liabilities
    • Accounts Payable
    • Debt
    • Deferred Revenue
    • Current Liabilities
  • Dissect the Company's Equity to Gauge Its Historic Profitability and Solvency
  • Analyze Key Balance Sheet Ratios and Other Derived Metrics
    • Examine Balance Sheet Ratios and Other Metrics
    • Measure Receivables as They Relate to Revenue and Prior Periods to Reveal Critical Trends
    • Measure Inventory by Looking at Inventory Turns
    • Monitor the Changes in Deferred Revenue
    • Tangible Book Value

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