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Today’s Topics

Today’s Topics. Cash Flow Shenanigans Metrics Shenanigans. Cash Flow Shenanigans. CFS #1: Shifting Financing inflows to Operating inflows CFS #2: Shifting Operating outflows to Investing outflows CFS #3: “Inflating” Operating inflows through normal but infrequent ops

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Today’s Topics

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  1. Today’s Topics • Cash Flow Shenanigans • Metrics Shenanigans FORENSIC ACCOUNTING - BA124 - 2013

  2. Cash Flow Shenanigans CFS #1: Shifting Financing inflows to Operating inflows CFS #2: Shifting Operating outflows to Investing outflows CFS #3: “Inflating” Operating inflows through normal but infrequent ops CFS #4: “Inflating” Operating inflows through normal operations FORENSIC ACCOUNTING - BA124 - 2013

  3. CFS #1 Bank borrowings as CFO Sale of receivables as CFO Sham sale of receivables as CFO FORENSIC ACCOUNTING - BA124 - 2013

  4. CFS #2 Boomerang transactions Capitalization of operating expenses Treating inventory purchases as investing activities FORENSIC ACCOUNTING - BA124 - 2013

  5. CFS #3 Inheriting cash flows via acquisition Acquisition of customers or products Structuring a divestiture to benefit operating cash flows FORENSIC ACCOUNTING - BA124 - 2013

  6. CFS #4 Paying vendors more slowly Collecting from customers more quickly Purchasing less inventory Limited disclosure of one-time benefits FORENSIC ACCOUNTING - BA124 - 2013

  7. Metrics Shenanigans MS #1: Misleading metrics that overstate performance MS #2: Distorting metrics that avoid bad news FORENSIC ACCOUNTING - BA124 - 2013

  8. MS #1 Proforma revenue metrics Proforma earnings metrics Proforma cash flow metrics FORENSIC ACCOUNTING - BA124 - 2013

  9. MS #2 Distorting A/R metrics Distorting inventory metrics Distorting financial asset metrics Distorting debt metrics FORENSIC ACCOUNTING - BA124 - 2013

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