Contact
The powder settlement is an act of dissolving accounting figures such as sales, profits, assets, and abilities in order to make the company better than the actual situation.
The most important thing for investors is not only looking at profits, but also checking the unnaturalness of sales cash flows, receivables, profit margins, business descriptions and theme changes.
In this article, I will explain the basic points for beginners to notice the risk of powder settlement.
First Con まず
It is not easy for individual investors to fully look at the powder settlement.
However, there is a sign that you can check before going to a dangerous company.
| Dangerous Signs | ation |
|---|---|
| Inc ing profit | Income Statements, Financial Statements |
| Low cash flow | Cash Flow Statement |
| Sold more | Balance Sheet, Note |
| too abstract | Financial Results and IR Materials |
| Business theme changes frequently | Past Disclosure, History and Business Description |
The most important thing is to see “profit” and “cash” in a set.
Companies that do not increase cash while gaining profit must carefully check the reasons.
What is powder decoration?
Powder ion is an accounting operation that shows the company's financial results better.
Typical shapes include:
- Show more sales
- Overcome profits
- Forward Loss and Cost
- No degradation of asset value
- Prevents borrowings and見えabilities
Specifically, it may be used to show a company that looks deficit in black or to show a company that is hard to repay.
However, there are areas that require specialized judgment for accounting.
Therefore, it is important to check whether it is possible to explain, whether it is matched with cash or transaction actual situation, rather than just changing numbers.
Why Powder がion Earnings
There is a pressure to protect the evaluation from the market.
We are conscious of stock price, credit from bank, relationship with business partners, listing maintenance, and financing.
The following problems may occur when business performance deterioration occurs.
| Agg ive performance | Corporate Impact |
|---|---|
| Stock Price | Decrease in Critique and Financing from Shareholders |
| Deterioration of Bank Rating | Deterioration of borrowing conditions, difficulty of additional loans |
| Dec ed credit | Business partners and customers |
| Listed Maintenance Risks | Degradation in the market |
When these pressures increase, some companies are confusing to hide bad numbers.
Investors should not only believe in the company description, but also see the consistency of numbers.
Common Methods1
The predecessor of the sales is to increase the amount of sales of transactions that are not yet recognized as sales.
For example, if sales are recorded even though the provision of products and services has not been completed, the sales and profits of this、 year will look good.
However, this may only have future sales.
The points you want to check are as follows:
| ation | See Meaning |
|---|---|
| Reasons for Inc ing Sales | Is there a description of new customers, price revisions, acquisitions, accounting changes, etc. |
| Increased sales | Is it recovered after sales record? |
| Rebound for the next term | Is the growth of the next period in the previous fall? |
Note that the sales are increasing rapidly, if the explanation is ambiguous and the cash collection is weak.
Common Method 2 Hide Loss
In the powder settlement, loss may be forwarded in order to prevent the appearance of bad numbers.
For example, if you leave the inventory and investee in which the value falls, in the booklet, high value, you will lose the loss.
| 本来の姿 | View |
|---|---|
| Dec ed asset value | High assets |
| The deficit business is worse | Less loss |
| There is a difficult receivable | Receivables look normal |
Individual investors can easily notice discomfort when they see the increase or decrease of inventory, receivables, investment securities, bricks, loans, etc.
Common Method 3 Blank Sales
空ctitious sales are to calculate non-existent transactions or poor real-world transactions as sales.
In this case, you can see more sales and profits in the profit statement.
However, cash is not included, so it’s easy to increase sales and reduce sales cash flow.
| 数字 | Ease of change |
|---|---|
| Sales | Close |
| Profit | Close |
| Payment | Close |
| Cash Flow | weakening |
| Cash Balance | Hard to understand |
In other words, it is important to check not only sales but also sales receivables and sales cash flow when viewing the powder ing settlement.
Danger Sign 1 Inc ing profit
A company with a sharp increase in profit looks attractive at first g.
However, if the entire industry is bad, but only the company is growing rapidly, or if the reason for increasing profit is ambiguous, it is necessary to confirm.
The following points are:
- Is the same sales?
- Is there a sudden improvement of profit margin?
- Is it a temporary special profit?
- Is there any change in accounting policy?
- Is it impossible to explain cost reduction?
It is not bad for rapid growth.
The important thing is whether there is a specific reason to explain the growth.
Dangerous Sign 2 Low operating cash flow
Sales cash flow is an indicator of how much cash is generated in the business.
Please note that if there is no accounting profit, the operating cash flow is continuously weak.
For beginners, this is a state that "the bookstore is profitable, but the hand money is not included".
Of course, growth companies may temporarily weaken the sales cash flow due to advance investment and increase sales.
However, if the condition lasts long, it is necessary to doubt the quality of the profit.
Dangerous Sign 3 Severely Increased
Receivables are money that has not yet been collected after offering products and services.
In order to increase sales, it is natural to increase sales.
The problem is that the receivable is increasing at a higher pace than sales.
| Contact | Notes |
|---|---|
| Increase sales and increase sales | 回収ation of recovery delays and overhead sales |
| Longer recovery period | Check customer’s ability to pay and transaction status |
| More loans | Possibility of increasing unrecoverable risk |
Receivables are important clues to confirm the quality of sales.
Danger sign 4 description is too abstract
In a company with a powder decoration risk and a new business with a thin actual condition, the explanation tends to be abstract.
For example, only the following words are 。.
- Innovative Solutions
- Next Generation Platform
- Strategic Partnership
- Large Project Schedule
- Global Expansion
These words are not bad.
However, if a specific customer, contract, price, sales scale, profit rate, and recovery status are not shown, it is weak as the basis for investment decisions.
When an investor sees an abstract, let’s see what it sells and who pays.
Dangerous sign 5 Business theme changes frequently
It is necessary to pay attention to companies that move to trendy in a short time.
For example, a company whose main focus is on another business in the past, suddenly puts the theme of AI,V, Web3, Bio, and Space into the front.
The challenge of new business is not bad.
However, if you are moving to the next trend theme while the past theme does not produce results, you need to check whether it is a description that aims for market popularity.
The following is not the theme name.
| ation | Reasons to See |
|---|---|
| Home | Is there a professional talent in the field? |
| Investment | Are you investing in development, equipment and recruitment? |
| Customer | Is there an introduction or contract? |
| Sales | Is the business reflected in the number? |
Even if the theme changes, you should carefully look at your investment decisions if you are not connected to sales or cash.
How to実践 Personal Investors
To avoid the risk of powder settlement, check the minimum of three.
| ation | Reason |
|---|---|
| Cash Flow | See if you are earning cash in the business |
| Receivables | See if sales are connected to recovery |
| Changes in Profit Rate | Checking unnatural improvements and temporary factors |
If you do not know the reason for this 3, please check financial statements, securities reports, timely disclosures, audit opinions, etc.
If you do not understand yet, it is also important to make decisions that do not invest in it.
Common failures for beginners
Investment actions that are difficult to notice the risk of powder settlement include:
- View Stock Price Chart
- Buy only with SNS reputation Believe in s and influencers
- “Because it’s」ing” Determine only by heading without reading the financial statement
SEC and Investor. Gov encourages us to be aware of the red flags of investment fraud, such as difficult-to-understand explanations, excessively good stories, and solicitations that will make decisions right now.
In the same way as stock investments, it is necessary to be cautious to companies that do not understand the description and the consistency of numbers.
The powder settlement is an accounting operation that shows the company's numbers better.
The following five points are especially important for beginners:
| Dangerous Signs | See Points |
|---|---|
| Inc ing profit | Growth Reasons and T Factors |
| Weak sales CF | Profit and Cash Loss |
| Sold out | Sales Recovery Status |
| 的 description | Customer, Product, Price, Contract |
| The theme changes frequently | Real investment, customer, sales |
Before investing, check whether both profits and cash are included.
This makes it easy to avoid dangerous companies that can only be seen by numbers.
出典
- Investor.gov "Red Flags of Investment Fraud Checklist": https://www.investor.gov/protect-your-investments/fraud/how-avoid-fraud/red-flags-investment-fraud-checklist
- SEC "Be Alert for Telltale Signs of Online Investment Fraud": https://www.sec.gov/investor/pubs/cyberfraud/signs.htm
- Investor.gov "Investor Alert: 10 Red Flags That an Unregistered Offering May Be a Scam": https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-alerts/investor-36