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CFA Level 1 - Chapter 10: Red Flags INTRODUCTION
We conclude our five chapter discussion on financial statements with a brief, yet important chapter on red flags. Although companies are required to follow Generally Accepted Accounting Principals (GAAP), many companies find loopholes and ways to fudge their numbers. These items are crucial for analysts to recognize in order to avoid recommending poor investments to their clients. Prime examples of recent bad apples are Enron and Worldcom.
The following articles are great resources on spotting the signs of earnings manipulation, learning telltale signs of corporate misdeeds, and how off-balance sheet entities can be misleading:
Next: CFA Level 1 - Managerial Discretion |
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