Our Fake Cash Flow Fraud model aims to highlight companies which are faking a significant portion of their sales and profits, hiding the evidence as a fabricated asset on the balance sheet, such as receivables, prepayments, deposits or even cash. It was originally designed to highlight Chinese frauds but has successfully identified larger non-Chinese frauds such as Wirecard, Folli Follie and Satyam. The model is a discrete score between 0-4 which reflects four criteria. It is triggered if a company scores a full four points. Investors should be particularly concerned if our Excess Capital Raising Model is concurrently triggered as it raises the risk that cash has been overstated. Around 8% of companies globally trigger both models. The next step is to conduct an in-depth peer group comparison.

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