The Business Doctor - John M. Leask II CPA/ABV, CVAJohn M. Leask II CPA/ABV, CVA

The Business Doctor - John M. Leask II CPA/ABV, CVA

Accounts Receivable

Part 1 of a 4 part series Warning Signs:
    • Receivables exceed 50 days outstanding.
    • Days receivables outstanding increases significantly.

 

Accounts Payable & Other Liabilities

Warning Signs:
    • Decrease in cost of goods sold to payables.
    • Lost cash discounts.
    • Significant increase in trade payables.

 

Administration Expenses:

Part 1 of a 6 part series Warning Signs:
    • Increased administrative expenses.
    • Increased overhead expenses.
    • Significant adverse deviations from budget.

 

Cash

Part 1 of a 3 part series Warning Signs:
    • Significant decrease in working capital.
    • Significant decrease in current ratio.
    • Significant decrease in quick ratio.

 

Cost of Goods Sold

Part 1 of a 2 part series Warning Signs:
    • Decreased gross margin.
    • Increased cost of goods sold.
    • Significant adverse deviations from budget.
    • Significant increase in a particular line item's cost.

 

Equity

Warning Signs:
  • Things to be aware of and questions to ask.
Steps to Improve:
    • Is the company adequately capitalized, undercapitalized or overcapitalized?

 

General Business Practices

Part 1 of a 3 part series Warning Signs: PROFITABLITY/EXPENSE CONTROL
    • Falling profits (before owner's compensation).

 

Income Taxes

Warning Signs:
    • Income tax, payroll tax or sales tax penalties.
    • Lack of tax planning.
    • Paying too much in taxes.

 

Inventory

Part 1 of a 2 part series Warning Signs:
    • Decreased inventory turnover.
    • Increase in inventory days outstanding.
    • Frequent inventory shortages.
    • Sudden growth in inventory.

 

Notes Payable and Long Term Debt

Part 1 of a 3 part series Warning Signs:
    • Increasing net sales to net working capital.
    • Rising net fixed assets to tangible net worth ratios.
    • Rising debt to tangible net worth ratios.