1. Receivables:
Continuously high growth in Receivables could indicate fictitious sales as Receivables.
2. Operating Cash Flow:
If a company is reporting positive and rising profits, but negative or declining Operating Cash Flow, it could mean that it's showing accounting earnings, without any actual cash.
3. Inventory:
If a company doesn't report the inventory used in producing goods as a cost, this increases the inventory in Balance Sheet and reduces net expenses, thereby boosting profits, which constitutes a fraud.
4. Unusual Asset in Balance Sheet:
If you're unable to understand an unusual / unheard-of asset on a company’s Balance Sheet, it's best to avoid its stocks as it may have "hidden" an expense as an asset there, to boost profits, instead of actually showing it in Income Statement as a real expense.
5. Revenues:
If a company's revenue is not seasonal in nature, and it still shows abnormal growth in its last quarter's revenues to boost annual figures, it's best to avoid it.
6. Schedules:
In absence of schedules, one cannot make out the actual total debt of the company.
7. Loans & Advances:
If the advance is made to a related party or the promoter without sufficient interest, then it may be a way to siphon off money.
8. Contingent liabilities:
These include pending cases in the court or warranties given to customers, etc., and a negative outcome can erode a substantial portion of the company's net worth.
9. Detailed financials of subsidiaries:
There may be cases where the money is poured into a loss-making subsidiary just to benefit the promoters.
10. Management compensation:
If the management is taking out huge salaries, even in lean periods, it may not have shareholder interest as its top priority, especially when fixed component is high and only a small part depends on profits.
11. Board composition:
If all board members are irregular in attending company meetings, and there are very few independent directors, it's not a good sign.
12. Auditor's history:
If auditors have been changed frequently or they have resigned unexpectedly, this is a sign of trouble in making.
13. High related-party transactions:
If a company is heavily selling or purchasing goods from the promoter's private firm to give it an undue advantage, it smacks of malafide intention.
14. Serial resignations:
If the top management or key personnels are frequently resigning or being replaced, it should be thoroughly investigated.
Continuously high growth in Receivables could indicate fictitious sales as Receivables.
2. Operating Cash Flow:
If a company is reporting positive and rising profits, but negative or declining Operating Cash Flow, it could mean that it's showing accounting earnings, without any actual cash.
3. Inventory:
If a company doesn't report the inventory used in producing goods as a cost, this increases the inventory in Balance Sheet and reduces net expenses, thereby boosting profits, which constitutes a fraud.
4. Unusual Asset in Balance Sheet:
If you're unable to understand an unusual / unheard-of asset on a company’s Balance Sheet, it's best to avoid its stocks as it may have "hidden" an expense as an asset there, to boost profits, instead of actually showing it in Income Statement as a real expense.
5. Revenues:
If a company's revenue is not seasonal in nature, and it still shows abnormal growth in its last quarter's revenues to boost annual figures, it's best to avoid it.
6. Schedules:
In absence of schedules, one cannot make out the actual total debt of the company.
7. Loans & Advances:
If the advance is made to a related party or the promoter without sufficient interest, then it may be a way to siphon off money.
8. Contingent liabilities:
These include pending cases in the court or warranties given to customers, etc., and a negative outcome can erode a substantial portion of the company's net worth.
9. Detailed financials of subsidiaries:
There may be cases where the money is poured into a loss-making subsidiary just to benefit the promoters.
10. Management compensation:
If the management is taking out huge salaries, even in lean periods, it may not have shareholder interest as its top priority, especially when fixed component is high and only a small part depends on profits.
11. Board composition:
If all board members are irregular in attending company meetings, and there are very few independent directors, it's not a good sign.
12. Auditor's history:
If auditors have been changed frequently or they have resigned unexpectedly, this is a sign of trouble in making.
13. High related-party transactions:
If a company is heavily selling or purchasing goods from the promoter's private firm to give it an undue advantage, it smacks of malafide intention.
14. Serial resignations:
If the top management or key personnels are frequently resigning or being replaced, it should be thoroughly investigated.