Economic and Financial Position of the Company (PEF)
The important thing about the chart that we are going to make is not the exact mathematical position of the company within that chart, but the comparison with the industry averages and above all the evolution, the course, of that situation over different periods.
As we see we reflect the P.F. on the horizontal axis and the P.E. on the vertical axis, pointing out the discontinuous lines of the industry average or the leading company with which we are going to compare.
It is obvious that it is best to be in quadrant 1 and nothing recommended to be in the 3.
As for quadrants 2 and 4, it will always be better to be in quadrant 2, because even if we have a bad financial position (FP), by having a good economic position, if our creditors leave us time, we will generate profits that will allow us to improve the precarious financial situation. On the other hand, in quadrant 4, in spite of having a lot of money left over, if we do not react in time, little by little we will use our reserves to cover the losses that a bad product or a bad structure are generating and we will end up, without any doubt, in quadrant 3
The coach should help the entrepreneur / businessman to draw the EFP chart from the following examples
|YEAR 1||YEAR 2||Sector|
|YEAR 1||YEAR 2||YEAR 3||Sector|
The coach must guide the entrepreneur in the search for ratios of his sector as indicated and compare them with those he has obtained from his financial economic plan.
1.- Make your own PEF chart
2.- Reflect on the quadrant you are in and make decisions about it