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

Accounts Receivable

• Receivables exceed 50 days outstanding.
• Days receivables outstanding increases significantly.

Accounts Payable & Other Liabilities

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

Administration Expenses:

• Increased administrative expenses.
• Increased overhead expenses.
• Significant adverse deviations from budget.

Cash

• Significant decrease in working capital.
• Significant decrease in current ratio.
• Significant decrease in quick ratio.

Cost of Goods Sold

• Decreased gross margin.
• Increased cost of goods sold.
• Significant adverse deviations from budget.
• Significant increase in a particular line item's cost.

Equity

• Things to be aware of and questions to ask.

• Is the company adequately capitalized, undercapitalized or overcapitalized?

General Business Practices

• Falling profits (before owner's compensation).

Income Taxes

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

Inventory

• Decreased inventory turnover.
• Increase in inventory days outstanding.
• Frequent inventory shortages.
• Sudden growth in inventory.

Notes Payable and Long Term Debt

• Increasing net sales to net working capital.
• Rising net fixed assets to tangible net worth ratios.
• Rising debt to tangible net worth ratios.