I would still like to know


W

Wayne Brasch

I asked several days ago about how many accountants that read this newsgroup
use the four main bankruptcy predictors to help their clients stay out of
Bankruptcy Court. So far, I have had no affirmative responses. Does nobody
but me use these tools to help their clients? My clients really like and
appreciate the use of these to let them know if and when they are headed
toward trouble. Some of them have told others about this and have gotten me
additional clients because of my desire to help them.

Wayne Brasch, CPA, M. S, Taxation
 
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D

durand26

Hi Wayne,

I've just done a bachelors degree in accounting (University of South
Australia), and followed it up with a Grad Dip in applied finance
(Securities Institute of Australia), and in all that time we were
never taught about the bankruptcy predictors. I did come across logit
(accidentally, while researching an essay on whether financial reports
are useful). But we were never taught it at uni. (Mind you, I haven't
done my CPA yet.)

So firstly, you're a total legend for posting it up here! I look
forward to impressing my clients!

But on the other hand, if you had one number that tells you something
as broad as "You are about to go bankrupt", would it be useful? ie, if
you're a manager presented with that information, what does it tell
you to do? In contrast, something more specific could tell the
manager what aspect of the business needs saving. Eg, net interest
cover, days creditors/debtors, how quickly we turn over inventory.

Mind you, a number that says whether the client is about to go
bankrupt is a great way of getting their attention so that they listen
carefully to the speech about how Net Interest Cover Affects Our
Lives. Thanks :)
 
W

Wayne Brasch

durand26 said:
Hi Wayne,

I've just done a bachelors degree in accounting (University of South
Australia), and followed it up with a Grad Dip in applied finance
(Securities Institute of Australia), and in all that time we were
never taught about the bankruptcy predictors. I did come across logit
(accidentally, while researching an essay on whether financial reports
are useful). But we were never taught it at uni. (Mind you, I haven't
done my CPA yet.)

So firstly, you're a total legend for posting it up here! I look
forward to impressing my clients!

But on the other hand, if you had one number that tells you something
as broad as "You are about to go bankrupt", would it be useful? ie, if
you're a manager presented with that information, what does it tell
you to do? In contrast, something more specific could tell the
manager what aspect of the business needs saving. Eg, net interest
cover, days creditors/debtors, how quickly we turn over inventory.

Mind you, a number that says whether the client is about to go
bankrupt is a great way of getting their attention so that they listen
carefully to the speech about how Net Interest Cover Affects Our
Lives. Thanks :)
If you analyze the results from using any of these predictors, you can tell
the trouble areas for any client. That is more important than showing them
a probability as does Logit Analysis. If you spot the trouble area, you can
tell your client what needs to be changed in order to succeed. Some of the
specific items you mentioned are included in some of these predictors.

Wayne Brasch, CPA, M. S. Taxation
 
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T

Tippy

I asked two people about their use of those tools. First, they aren't the
only ones. Do a google.

2nd...the CPA I spoke with did not use it in the work that he does with
government financial statements. The other auditor used some of those tools
when he was a federal contracting officer and looked at whether the
contractor was viable.

I would think they would be useful in audits with regard to OMB Circular
A-133. The one entity that the tools would have been a great help, hadn't
had the required audit. The CPA firms kept jumping ship. When we were
called in-- we did a relatively thorough review, enough to know that the
government was not getting what the grant provided for.

Tippy
 

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