• Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint

Step 9: Red Flags

Now it's time to check for red flags signaling a potential earnings shortfall in the current or next quarter and for yellow flags warning of longer-term problems. At your option, you can compare net income to operating cash flow, and if your candidate passes that test, skip the accounts receivables and inventory tests.

Sales Growth

A slowdown in historical year-over-year sales growth rates is a red flag, but if it exists, you would have discovered it in Step 8. In this section, you'll compare forecast sales growth rates to historical trends. It's a red flag if the forecast sales growth rates are significantly below historical levels.


PREVIEW

                                                                          

Not a subscriber?

Start A Free Trial


  
  • Creative Edge
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint