Advanced, Analytical Techniques for Performing Forensic Financial Analysis.

Financial statement fraud is a "new face on the block," and the intent to conceal and take advantage by false suppression of the truth of assets, liabilities, cash flow, sales and profitability is creating a new level of risk for corporate America. With this new level of risk, the credit department must have a new level of analytical comprehension and intellect to uncover these devious techniques. The threat of financial fraud has greatly impacted the corporate community worldwide. The credit analyst of the future must also be able to cope with the adverse conditions related to IPOs, mergers, recapitalization, leveraged buyouts, Chapter 11 bankruptcies, and economic turmoil and volatility.

Those companies falling in the category of high risk are impacted by the following conditions:

Weak Solvency -- weak liquidity ratios, highly leveraged condition and overcapitalization.

Weak Efficiency -- slow turnover of accounts receivable, accounts payable and inventory, turnover, or substantially inadequate cash flow/working capital to sustain growth and/or reinvestment.

Weak Profitability - deviations in profitability or unprofitability.

Dealing with these conditions requires an analyst with a diverse level of experience and knowledge in the field of advanced financial and economic risk analysis. Analyzing at this level is commonly referred to as forensic financial analysis. This methodology can be utilized when analyzing high-risk customers, vital suppliers and for minimizing the potential of financial fraud.

The use of bank reference information is also important when assessing the financial condition and credibility of corporations.