Neither global energy giant Enron was the first of its kind nor Indian software major Satyam was the last. Crook companies were always around and will continue to stay despite international governments making their best efforts.
Advice for spotting a crook
1. Go through its financial statements in detail.
2. Go through its balance sheets
3. Find how long the company has been in business and where does its funding come from.
Here is how to spot a crook company and avoid being victim of an investment fraud.
Spotting the Shenanigans
The crooks are getting smarter by the day. It is no longer sufficient to know the basics of investment, you got to know how to play the detective and catch the cheat by going through its trail.
Plenty of valuable information can be found in the balance sheet of the company. But you need to be an expert in reading the balance sheets as 'little knowledge can be dangerous'. Actions taken on the basis of insufficient knowledge can lead to complete loss of investment. If anything appears to be suspicious about financial statements of a company, one should seek expert opinion at the earliest.
Certain practices are rampant among bogus companies: recording phony transactions, inflating them, deferring expenses or booking to a later time and disguising one-time gains as regular income. Some of these may go on unrecorded in annual statements or hidden in fine print.
At times, it takes the eye of an expert to catch the follies and spot the black sheep. You ought to read works of financial experts to become one or contact one so as to be completely sure about the company which you are investing in.
Fake companies and investment offers
Phone calls and emails offering investment options that are too good to be true are rampant. Incessant calls, glossy brochures and claims of being associated with a reputed organization are some of the ways in which a cheat would try to lure you. As soon as you come across one, you need to get in touch with relevant authorities.