July 26, 2019 at 9:24 PM #173303Nitin BhatiaKeymaster
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Financial Statements Irregularity is very difficult to find out but in this video, I will share 7 tips to identify the Financial Statement irregularities. You can easily find out whether the company is cooking books or not.
In the first part of this video series, we learned why companies cook their books and how it is done. Let’s learn the tips that can be useful for investors to identify the same
1. The revenue and cash flow of the company should be directly proportional to each other i.e. both should increase or decrease together. If an investor finds any discrepancy then it points to something wrong.
2. The total of all the four-quarter results should be equal to the annual result of the company with very minor variation.
3. Sometimes companies acquire another company to cook their books.
4. If there is a sudden and sharp increase in Trade payable then you should be cautious as the company is booking revenue but not realized the cash
5. The resignation of auditor or CFO is not a good sign
6. In the case of cross-holding, kindly keep a close watch on the financial transactions among the sister concerns.
7. If there is a delay in the announcement of quarterly or annual results then you should try to find out the reason.
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