Warning Signs Of A Troubled Company
few people seem to spot the early warning signs of a company in distress in addition to a sustained stock price decline. here are some key signals. cash flows. cash flow is a company's life line. long periods of time where cash payments exceed a company's cash receipts could be a sign that a warehouse is full of product that isn't selling or too much cash is being spent on unnecessary expenditures. debt levels. high interest repayments fill cash flow which can place pressure on distress companies. a high total debt-to-equity ratio generally means higher risk of a company failing. when corporate debt levels are ? those in the company's peers and exceeding its own historical amounts, the company might face liquidity problems in the near future. rumors of sec investigations. for more investigations by the securities and exchange commission often precede corporate collapses. that's not surprising. many companies guilty of breaking rules do so because they're facing financial difficulties. when an investigation is officially announced, the stock price will typically plummet on the news. insider actions. executives and directors have the most updated information on their company's prospects. if insiders are selling their shares, it could be a red flag. similarly, if key executives or directors are exiting the company, things could be going downhill. while these actions may be completely innocent, they demand closer inspection. knowing the difference between a company on the verge of collapse and one that's undervalued isn't always easy. however, by taking into a company's activities and financial statements, even the average investors can identify potential problems.
- go downhill・・・悪化する