Red Flags that show a Company is in Real Trouble

• Huge Goodwill figure in Balance Sheet
• Current Ratio < 1
• High Debt-to-Equity (High Gearing)
• A very high number that is hidden in the notes, but not shown in the actual financial tables: Read the annual report backwards, because the stuff that directors really don't want you to find will be at the back.
• Cash Flow not in line with Earnings: Compare FCF/share with EPS
• Highlighted Adjusted EBITDA: This is directors' favourite number, because it always goes up
• Key Management Changes: either they were brilliant and have been poached or they were rubbish and have been dumped
• Directors dumping shares
• Having only one "reliable" customer (eg. government)
• Rapid Expansion: Expansion needs to be controlled