AboutFinance Guy Expertise 1. All questions relating to finance
2. All practical aspects of mergers and acquisitions
3. Many general business questions
Experience Considerable experience in the area consisting of 25 years in both consumer and commercial finance and business management, including 15 years specializing in international Mergers and Acquisitions with over $100 billion in assets acquired
Education/Credentials Business administration undergrad
Wharton post grad in finance
Awards and Honors numerous corporate awards
Past/Present clients range from small enterprenurial companies to large multinationals
Expert: Finance Guy Date: 6/3/2008 Subject: Accounting fraud?
Question Dear Ron,
Is there a possibility where a corporate borrower, realizing that banks evaluate it's accounts through ratios, try to do some tricks with the figures in a way that looks good with the ratios but the real situation is the very opposite? What are the common methods of such fraud and the bankers' solution to these?
Thanks.
Answer Sure, but it goes deeper than ratios.
Corporations have inflated the value of assets, refused to properly mark down assets to current valuations, over stated income, under stated expenses, capitalized expenses instead of expensing them (over states income) created false sales and profits, sold financial assets with recourse in excess of FASB guidelines and still gave the transaction sale treatment, etc, etc.
This is not an exhaustive list, and represents just some of what I have seen in my career.
