16 Red Flags to Watch for in a Company’s Financial Statements
Use our handy financial health checklist to spot potential problems in a stock before they cause you to incur a large loss.
Analyzing financial statements can help you avoid stocks with significant underlying risks. The numbers within the statements can reveal deteriorating trends, excessive debt, customer problems and other issues that may lead to a drop in the stock’s price.
The potential problems identified may be ones either not mentioned or downplayed by corporate executives. Whereas a CEO will try to position their company in the best possible light, the numbers reveal trends as they are—good or bad. Warning signs often show up in the financial statements before they make headlines.
In this installment of our financial statement analysis series, we walk through 16 red flags that may signal business or financial trouble. Recognizing these indicators may help you spot potential problems before your portfolio is harmed by them.