TOOL 1.2
FINANCIAL
| Financial Ratios etc. | • Deterioration in any financial ratios (Earning Capacity, Liquidity & Cash Flow, Solvency) (See Tool PL 5.4 ) • Change in trends • Unexplained changes in key numbers or ratios • Company is profitable but does not generate any cash flow • Significant off balance sheet items • Mismatches of tenor or currency |
| Accounting Policies | • Changes in key accounting policies • Unusual policies being adopted • Failure to use generally accepted policies • Accounts are qualified by the auditors • Change of accounting date • Unclear or changing span of consolidation • Frequent reclassifications of assets and liabilities • Improper use of Extraordinary Items (usually to protect operating profits) • Revaluations of assets without independent verification |
| Quality of Information | • Accounts are late or out of date • No updates are provided • The company cannot or will not give projections without good reason • The reporting format changes to obscure key changes or reduce detail • Adjustments being made to prior year’s figures |
| Auditors | • Auditors do not have the resources to audit a company of a certain size • Company has grown rapidly but still uses its original auditors • Frequent or sudden change of auditors • Auditors are not truly independent |
