3 Ways to Assess Company’s Financial Health Before Accepting an Offer

When you’re considering a new role, it’s easy to focus on the job description, the title, or even the salary.

But there’s a deeper question you should be asking: is this company financially healthy enough to support your career long term?

After all, even the most exciting role can quickly lose its shine if the organization is struggling with layoffs, mounting debt, or unclear growth plans.

The good news is, you don’t need to be a Wall Street analyst to spot the warning signs.

With the right approach, you can tap into publicly available data, decode key financial metrics, and ask smart questions in your interview to get a clear picture of where a company really stands.

This guide will show you how to do exactly that, so you can make informed career decisions and avoid stepping into a sinking ship.

1. Become a Master of Public Information

For publicly traded companies, a wealth of financial information is available to you, for free! You just need to know where to look.

SEC Filings are Your Friend: The U.S. Securities and Exchange Commission (SEC) has a database called EDGAR where you can find all the financial reports public companies are required to file. The most important ones for you are the 10-K (annual report) and the 10-Q (quarterly report).
What to Look For: Don't get bogged down in the numbers. Instead, focus on the big picture. Look at the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section. This is where the company's leadership team explains their financial performance in plain English. Pay attention to their discussion of risks and challenges. Are they consistently blaming external factors, or do they have a clear plan to address the issues? Look at the financial statements for trends. Is revenue consistently growing year after year? Or is it fluctuating wildly?
Financial News Outlets: Websites like Yahoo Finance, Bloomberg, and MarketWatch offer free and easy-to-digest financial information. You can quickly see a company's revenue, net income, and stock performance over time. Look for consistent growth. According to a study by the Reserve Bank of Australia, firms with a profit margin below 5% are significantly more likely to experience job losses. You can find this information on these sites. Also, look for news articles about the company. Are they in the headlines for positive reasons, like launching a new product, or for negative reasons, like lawsuits or executive departures?
Beyond the Financials: Don't forget to check employee reviews on sites like Glassdoor and Indeed. While these should be taken with a grain of salt, a consistent pattern of negative reviews about job security, layoffs, or mismanagement can be a red flag. Pay attention to reviews from people in roles similar to the one you are considering.

Also Read: How to find a job you love?

2. Decode the Key Financial Metrics

Now for a little bit of number crunching. Don't worry, it's easier than it sounds. Here are a few key metrics that will give you a snapshot of a company's financial health:

Revenue Growth: Is the company's revenue increasing or decreasing over time? Consistent revenue growth is a positive sign. You can calculate this by taking the current year's revenue, subtracting the previous year's revenue, and then dividing by the previous year's revenue. A 20% fall in sales can be associated with an 8% fall in headcount within the same year, according to the Reserve Bank of Australia.
Net Profit Margin: This tells you how much profit a company makes for every dollar of revenue. A higher net profit margin is better. Investopedia states that a company's bottom-line profit margin is the best single indicator of its financial health and long-term viability. A healthy profit margin shows the company can effectively control its costs.
Debt-to-Equity Ratio: This ratio compares a company's total debt to the total amount of money invested by its owners. A lower ratio is generally better, as it indicates that the company is not overly reliant on debt to finance its operations. A lower debt-to-equity ratio means more of a company's operations are being financed by shareholders rather than by creditors, a plus for the company as shareholders do not charge interest. A high debt-to-equity ratio can be a sign of risk, as the company may have difficulty making its debt payments if its earnings decline.
Current Ratio: This ratio, calculated by dividing current assets by current liabilities, measures a company's ability to meet its short-term obligations. A ratio above 1 is generally considered good, as it indicates that the company has more short-term assets than short-term liabilities. A company with a low current ratio may have trouble paying its bills on time, which could be a sign of financial distress.

Also Read: How can job rotation help your career?

3. Ask the Right Questions in Your Interview

Your interview is not just a chance for the company to evaluate you; it's also an opportunity for you to assess them. Use your final interview to ask some strategic questions about the company's financial health. Here are a few ideas:

"Can you tell me about the company's growth plans for the next few years?" This question can give you insight into the company's future outlook and financial planning. A strong answer will be specific and confident, outlining clear goals and strategies. A vague answer could indicate a lack of direction.
"How does the company handle economic downturns or market fluctuations?" This helps you understand the company's resilience and contingency plans. A well-prepared company will have a plan in place to weather economic storms.
"What are the company's biggest challenges right now?" The answer to this question can reveal a lot about the company's current financial situation. Every company has challenges, so an honest and transparent answer is a good sign.
"How is this role funded?" This is a direct question that can give you a lot of information. Is it a newly created position funded by recent investment, or are you backfilling a role? The answer can give you clues about the company's priorities and financial stability.

Wrapping Up

Remember to also pay attention to non-verbal cues and the overall transparency of the interviewer.

If they are evasive or dismissive of your questions, it could be a red flag.

By taking the time to evaluate a company's financial health, you're not just being a savvy job seeker; you're taking control of your career and ensuring your long-term job security.

After all, a great job at a struggling company is not a great job for long.

And while you’re preparing, remember that the company isn’t the only one under the spotlight, you are too.

Hiration can help you build standout resumes, practice interviews, and optimize LinkedIn profiles, so you can approach every opportunity with confidence.

Here’s to finding the right opportunity for you!