Gourab Biswas

Balance Sheet
Red Flags
High Debt Levels
Red Flag: An excessive amount of
debt can be risky.
How to Identify: Look for a high
debt-to-equity ratio. If it's too high,
it's a red flag.
High debt can lead to financial
instability and interest payment
issues.
Declining Assets
Red Flag: A decrease in the value
of a company's assets.
How to Identify: Compare current
and previous years' total assets. A
significant drop is a red flag.
Falling asset values may indicate
poor investment decisions or
financial troubles.
Unexplained Changes
in Inventory
Red Flag: Unexplained or sudden
changes in inventory levels.
How to Identify: Look for sudden
inventory fluctuations. Unexplained
inventory increases or decreases can
be red flags.
This may suggest poor inventory
management or obsolescence issues.
Accumulated Losses
Red Flag: Consistent losses over
several years.
How to Identify: Check the
retained earnings. If it's
consistently negative, it's a red
flag.
Repeated losses might indicate
financial trouble or an
unsustainable business model.
Off-Balance Sheet
Liabilities
Red Flag: Unreported or off-
balance sheet liabilities.
How to Identify: Scrutinize the
footnotes for potential hidden
liabilities like off-balance sheet
financing or guarantees.
Unreported liabilities can distort
the true financial picture.
Aging Receivables
Red Flag: Increasing accounts
receivable days (aging
receivables).
How to Identify: Calculate
accounts receivable days (average
collection period). If it's extending,
it's a red flag.
Growing aging receivables may
indicate difficulties in collecting
payments.
Inadequate Cash
Reserves
Red Flag: A lack of cash reserves
for emergencies or opportunities.
How to Identify: Compare cash and
cash equivalents to current
liabilities. If it's insufficient, it's a red
flag.
Inadequate cash reserves can lead
to liquidity issues.
Gourab Biswas
linkedin.com/in/gourab-biswas-98-gb

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