It is important to monitor the structure of the liabilities
Spain's Gross Domestic Product (GDP) has been increasing continuously since the second quarter of 2014, three years of economic growth in this new cycle, driven, among other measures, by the "abundant and cheap money" of the European Central Bank.
After the severe crisis of 2008, in which credit literally disappeared and families, businesses, and institutions were forced to reduce their debt, easy money returned. Who doesn't have pre-approved loan offers from their bank encouraging us to spend?
But after these years of monetary stimulus, there are now more than just rumors about a tightening of ECB policies; the money injection programs will end and interest rates will rise, probably by 2 or 3 percentage points. This could happen in the first half of 2019.
With rising interest rates, there is speculation about a possible drop in consumption, and therefore in sales. Faced with this threat, companies must take the following precautions:
- Look at the liabilities section of our balance sheet and see how our debt has grown. If there is excessive short-term debt earmarked for fixed assets (credit lines or discounted notes to finance machinery, facilities, or software, for example), we have until the end of the year to correct this with medium-term loans (3-5 years).
- Perform a simple balance sheet robustness exercise: what happens to our cash flow if sales fall by 5%, 10%, or 15%?
If we have taken out loans in a disorderly manner and/or failed the balance sheet robustness test, we must take corrective action.
If you have any questions about your situation, please contact our financial department. Follow this link to learn more about us: https://www.ambitassessor.com/areafinanciera/ca
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A graduate in Economics from the University of Barcelona, he is also a Certified Actuary, Real Estate Agent, and Insurance Broker.
He furthered his training with courses in taxation, business valuation, and credit management offered by the College of Economists of Catalonia and the Center for Financial Studies (CEF).
In 2000, he became the managing partner of the firm, and since 2011, he has also been responsible for the Finance Department.
For five years, while already a member of the management team at Àmbit Assessor, he also held the positions of Deputy General Manager and Finance Director at Alco Grupo Empresarial.
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