Financial Shenanigans, Fourth Edition: How to Detect Accounting Gimmicks & Fraud in Financial Reports, 4th Edition

We have climbed the first two mountains in our quest to conquer financial shenanigans, with two still to come. Until now, we have focused on assessing the performance of companies using two separate metrics: earnings and cash flow.

Part Two, “Earnings Manipulation Shenanigans,” discussed techniques for manipulating accrual-based performance numbers by playing around with revenue and expenses or shifting them to the wrong section or the wrong financial statement entirely. We pointed out the limitations of accrual-based performance metrics like net income, and we suggested that investors should expand their analysis to evaluate cash flow performance metrics such as cash flow from operations and free cash flow.

Part Three, “Cash Flow Shenanigans,” ...