What are the early signs of a financial crisis in companies?

Answer 1

If it was me, I would look at the company's financial statements, reviewing inventory (increase is bad--could mean they are struggling to sell), accounts receivable (increase is bad--could mean they have negotiated strange agreements with customers to accept their products), cash and debt/liabilities (less cash and more liabilities is bad, obviously). Also, lowered credit ratings by S&P and Moody's is bad.

Wall Street analysts are usually right on top of the larger companies. Some might say the analysts are jumpy and yell "The sky is falling" at the first sign of trouble. You can review analyst estimates on Yahoo! Finance. A drop in estimated earnings is not good. See attached web page, and look at the fourth section under Analyst Estimates, "EPS Trends".

Answer 2

Having trouble making debt payments or meeting debt covenants. Check the cash flow statement. Companies need to generate enough cash from operations to continue meeting dent and working capital requirements.

Also, significant drops in sales year over year is a sign the company is weakening.

Answer 3

dropping profit margins are a very early sign. Expanding accounts payables is another. Rising inventories is a dead give away.

Management issuing increasing number of reassuring press releases.

Answer 4

Check for layoffs or cutbacks. Also, If a bank wants to hold a company payroll check the company may be having problems with keeping enough funds in their account for payroll.

Answer 5

If you're a vendor, bills getting paid late is an early clue

Answer 6

A decrease in revenue and gross profit