Profit can be manufactured; cash flow is harder to fake. A durable checklist for receivables, inventory, related parties, and audit cues.
Why red-flag guides never expire
Accounting standards evolve and promoters get creative, but warning patterns recur: revenue without cash, inventory building faster than sales, and related-party loans disguised as growth.
Watch these before you pay up for growth
- CFO vs net profit: Persistent gap over multiple years.
- Debtor days rising while management claims strong demand.
- Inventory days climbing ahead of a capacity expansion story.
- Capitalized expenses growing faster than revenue.
- Related-party sales or purchases as a rising share of revenue.
- Auditor changes, qualifications, or CARO emphasis on internal controls.
Go deeper with our 5-step stock analysis checklist.
This article is for education and information only. It is not investment advice, a recommendation to buy or sell any security, or an offer to apply in any IPO. Past patterns do not guarantee future results.