Red Flags Every Investor Should Know

What this unit covers

Recognise the warning patterns across ratios and statements that should make you pause before investing.

By the end you will be able to

• Explain what makes something a red flag.
• Identify common places story and numbers stop matching.
• Treat a red flag as a prompt to look closer, not a final answer.

How it starts: A Story That Sounds Too Good

1. You read a glowing annual report about a fast growing company.
2. Sales rose sharply, but the money owed to it by customers rose even faster.
3. Would you have noticed this before putting in your savings?

Words you will meet

Red flag

A pattern where a company's story and its numbers do not match, worth a closer look.

Cash from operations

The actual cash a business collects from running its day to day work, as shown in its cash flow statement.

Receivables

Money owed to a company by its customers that it has not yet collected.

In this module: Measuring Business Performance

1. The Most Important Financial Ratios
2. Profitability & Efficiency
3. Debt, Cash & Financial Health
4. Red Flags Every Investor Should Know (this unit)