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FT Guide to Using and Interpreting Company Accounts, 4th Edition by Wendy Mckenzie

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15

Suppliers’ accounts

Introduction

The viability of suppliers is essential for any company’s long-term survival. No one wants to squeeze a good supplier so hard on price and payment terms that they risk losing them. This means that understanding your suppliers’ financial performance is an integral part of the supply relationship. If you want to protect your own business, you have to understand your suppliers’ businesses.

When you’re analysing suppliers’ accounts you’re usually trying to answer a number of questions:

  • Will they be able to deliver the order if we give it to them?
  • Have we got a good deal?
  • What’s the strength of our negotiating position?

If you look at the first question, you’ll see that there’s two parts to it, and financial ...

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