| Hello There! Here are some tips for all you | | | | Often times net income decreases significantly. If this |
| accountants out there who are thriving on this kind of | | | | happens for several years in a row the company is |
| information. This is for you. This particular article | | | | losing money and most will not survive consecutive |
| focuses on some red flags accountants need to | | | | loss years. |
| cover before proceeding with an analysis on financial | | | | Decreased Cash Flow |
| statements. tax consultants, tax agents, and home | | | | Cash flow always validates net income. If cash flow |
| based businesses also need to cover this information | | | | from operations expense is lower than net income |
| is at might help you. If you or your business needs in | | | | then the company is in big trouble. Also, if the sales of |
| figureing this complexities out consult your accountant | | | | plant assets are a major source of cash, this may |
| or tax consultant for more information. Okay, here is | | | | cause cash shortage. |
| the list the accountants are waiting for. Again this is for | | | | Too much Debt |
| financial statement purposes only. | | | | If the company’s debt ratio is way too high it may |
| Movement of sales, inventory, and receivables | | | | be unable to pay of its debts. |
| Sales, receivables, and inventory move together. | | | | Buildup of Inventories |
| Increased sales may lead to higher receivable and | | | | If the inventory turnover is low then the company may |
| require more inventory to meet demand. If there are | | | | be unable to sell goods ; or it may be overstating its |
| strange movements among sales, inventory, and | | | | inventory. Either case will require thorough investigation |
| receivables then there is trouble. | | | | and audit. |
| Earnings Problems | | | | |