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 three or 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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