📜 Introduction: As the fog of financials thickens, we venture deeper into the labyrinth of working capital tricks, adjusted illusions, and cash flow enigmas. Keep your wits sharp and your formulas sharper.
🔎 Blurb: Watson raised an eyebrow. “They have EBITDA and enthusiasm. Isn’t that enough?” Holmes smirked. “Not if they’re burning cash while serving optimism à la carte.”
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🎮 Game 6: The Working Capital Whodunit
Receivables are high. Payables are stretched. Cash looks fine. Should you worry?
🔁 Analyze working capital cycle
⏳ Perfect. The firm is financing growth with supplier credit. Risky.
📈 Compare receivables to revenue
📊 Receivables growing faster than revenue? Signal of revenue stuffing.
🪙 Trust the free cash flow figure
😬 Free cash flow was juiced by delaying payments. Unsustainable.
🎮 Game 7: The Adjusted EBITDA Escape
A unicorn touts “Adjusted EBITDA” with 25% margins. But GAAP net loss is $100M.
🧾 Examine adjustments
📉 Stock comp, office snacks, CEO jet — all adjusted out. This is fantasy finance.
📄 Compare to GAAP metrics
✔️ You’re a forensic rockstar. Reality lives in GAAP.
🎉 Believe the press release
😵 You just got WeWorked. Try again.
🎮 Game 8: The Cash Flow Conundrum
Income statement looks strong. But the firm is borrowing every quarter. Odd?
💸 Review cash from operations
🧾 It’s negative. Net income ≠ cash. They’re burning funds.
🧮 Check changes in working capital
💡 Bingo! Inventory spike and receivables rise. Hidden trouble.
📈 Trust net income trends
😬 Rookie move. You missed the real cash story.
🎮 Game 9: The Dividend Dilemma
A company pays consistent dividends, but earnings are volatile. Red flag?
💰 Review dividend payout ratio
📉 They’re paying more than they earn. Unsustainable and risky.
📊 Compare to free cash flow
✔️ Cash can cover it — for now. But the trend worries Holmes.
🎩 Assume it’s a blue chip
😕 Even legends can fall. Always verify.
🎮 Game 10: The Forecast Fudge Factor
Management’s forecast looks aggressive. 40% growth after 3 flat years. Hm.
📉 Compare to industry averages
🔍 Unrealistic growth. They’re setting the stage for disappointment.
📊 Ask about assumptions
🧠 Great! Their TAM numbers are inflated. Forecast = fluff.
🎉 Applaud their optimism
😬 A financial sleuth should be skeptical — always.