Are Layoffs Looming at Your Company?

These days, job security probably feels like a pipedream.

More than five million workers have lost their jobs since the recession officially began in December 2007, according to the Department of Labor. The unemployment rate hit 8.5% in March -- a 25-year high -- and economists expect even more record numbers to be logged in the upcoming months. In fact, 13% of the companies surveyed by Watson Wyatt in mid-February (the most recent study available) indicated that they plan to conduct layoffs in the next 12 months.

How can you tell if your employer's next?

If you work for a fairly small business, it's not difficult to tell when that business is struggling. "The pace of activity is an obvious clue," says Robert Keidel, owner of an organizational consulting firm in Philadelphia and visiting professor of management at Drexel University. "People just know when orders go down or there are fewer customers."

But what if you work for a large corporation and your everyday duties are far removed from the company's financial bottom line? Office gossip and your gut instincts aside, a look at your company's financial statements -- if it's a publicly-traded company, it's required to disclose these figures quarterly -- can give you a fairly good idea of its health. (To find these filings visit the Investor Relations section of your company's web site or search for them at the Securities & Exchange Commission's web site here.)

Here are four factors to help you get a better sense of whether your job may be in jeopardy.

1. Revenues

At the top of a company's earnings statement is revenue, or the sales the company received from its business activities. Calculate the change in revenue from year to year -- or for an even more detailed picture, compare the figures on a quarter-to-quarter basis. While variations within 10% are normal, a "precipitous decline" compared to the previous quarter or year -- one of 30% or more -- is pretty substantial. Enough so that employees should be concerned about their jobs, says George Tsetsekos, dean of Drexel University's LeBow College of Business.

2. Net Income

If the company's net income from operations (typically, the bottom line on a company's income statement) is close to zero, the company is operating very close to "break-even," meaning its expenses are roughly equal to its revenue and little to no profit is being made, says Tsetsekos. That puts the company in a precarious situation: Should it lose a big order or experience less demand overall for its products, the resulting drop in revenue could push the company's bottom line into the red. If the net income figure is in brackets that means the company is already losing money. Either way, it's not a good sign.

3. Cash Flow

One way companies get by while they're losing money is by tapping into their cash reserves. But if the company doesn't have a stash of cash, then it may have to rely on credit to pay the bills. If that's the case, consider yourself warned: Creditors are tightening their lending standards. As a result, many credit-reliant businesses are struggling to make payroll, which is forcing them to trim their work force or close their doors altogether.

That's why the construction industry was one of the first to show trouble when the credit crunch started, says Patrick O'Shei, a Springfield, Mass.-based business consultant who manages a large construction project for one of his clients. "As soon as credit became tight those companies ran out of cash to operate and fell like dominoes," he says. Not only were they bringing in no cash through sales, they weren't able to borrow any, either.

To find out how much cash your company makes -- or doesn't make -- check out its cash flow statement, which breaks down the cash a company earns from operating activities, investing and through financing. To figure out just how quickly the company is burning through its cash, compare the numbers for several consecutive quarters. "Any quarter in which the amount of cash burned is greater than a third of its cash reserves is significant," O'Shei says. "Two consecutive quarters in which more than half of cash reserves are burned would be an indicator of real trouble." (For cyclical businesses, a year-over-year comparison may paint a more accurate picture.)

4. Bond Ratings

Bond ratings, issued by rating agencies like Standard & Poor's, Moody's and Fitch Ratings, assess how likely a company is to pay back its debt obligations, or the bonds it has issued to raise capital. In a way, bond ratings reflect a company's long-term viability, says Daniel Feldman, associate dean of University of Georgia's Terry College of Business.

There could be many reasons why a company gets downgraded and these reasons may not necessarily affect its labor force directly. But a downgrade isn't a good omen for the company's overall health, Feldman says. You can check out a company's rating at each of the ratings agencies' web sites. (Moodys.com and Standardandpoors.com require registration, which is free. You don't have to register at Fitchratings.com.)