18 Warning Signs That a Business's Financial Statements Are Troubled

We're all familiar with managing our personal and business finances, but it's sometimes easy to miss important warning signs in financial statements. In the article below, let's take a look at 18 signs that businesses should not ignore to ensure the stability and success of financial statements.

1. The continuous loss of personnel on the payroll keeps increasing steadily.

2. Continuous loss, but revenue continues to increase year by year.

3. Revenue increased unusually compared to the previous year, although nothing special about the industry.

4. Revenue increased but gross profit decreased.

5. Gross profit ratio (Gross profit/Net revenue of previous year) is too low compared to industry or market average.

6. Profit after tax is too low compared to revenue

For example: revenue of 20 billion, profit after tax is only 10 million or less.

7. ROE (Return on Equity) ratio is too low compared to bank interest rates.

8. Cost of goods sold is higher than revenue.

9. Annual advances increase continuously.

10. Selling and administrative expenses suddenly increased.

11. Other receivables (Account 1388) increase year by year.

12. Equity has a negative balance (negative capital).

13. The amount of salary without balance at the end of the period.

14. The manufacturing company has a balance of Account 154 of zero at the end of the period.

15. Service companies have a balance of account 154 at the end of the period of zero (depending on the company).

16. The total amount of cash in the account is still exceptionally high, but borrowed.

17. Total amount receivable from large customers + total amount payable to large sellers + total loan amount (Sign of virtual invoice output, virtual input purchase and bank loan).

18. Inventories increase but sales decrease (It may be due to the purchase of the invoice for the inventory or it may be that the inventory material actually exists, but is not used in production, despite the fact that there has been production).

If any warning signs are detected in the financial statements, please quickly contact Viet Uc Auditing for timely consulting support. Readers have any questions, please contact Vietnam Australia Auditor at Hotline: 0848 770 777 for a free consultation!

Viet Australia
Viet Australia Auditing Company is an independent auditing organization licensed and established in 2007 in the Socialist Republic of Vietnam.