1. Book revenues ahead of time: Deterioration in cash flows in spite of a rise in EBIDTA suggests early booking of revenues.
2. Shifting of expenses away from the current period: If a company's depreciation to gross block of assets changes significantly, it may be using depreciation to manage earnings.
3. Mismatch in quarterly (unaudited) and annual (audited) figures: The annual PAT should tally with the quarterly numbers except for minor variations or those due to demergers or other restructuring.
4. Loans to related parties: Ideally, not more than 1% of loans or advances should be given to related parties (unlisted group companies or subsidiaries).
5. Inventory writedowns: Companies attempt to get inventory off their balance sheets and book it as revenues (thereby boosting profits).
6. One-time changes: Capitalisation of forex losses, losses on conversion of FCCBs, etc, not being recognised.
Source: www.moneytoday.in
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