The auditor's field guide
The warning signs we look for in every case file, explained in plain English, with the episodes where each one shows up.
An auditor's formal warning that a business may not be able to keep operating for another year without new money, a restructuring or a sale.
It's the most serious thing an auditor can say short of declining to give an opinion. In our verdict scale it's the bottom rung.
Seen in: Eddie Bauer · Surge AI · Satoshi Nakamoto
When a company buys another mostly with borrowed money, the combined business has to pay that debt back out of its own cash flow.
It works when the savings arrive fast. It breaks when sales slip, because interest is due whether stores are busy or empty.
Seen in: Saks Global
The interest rate investors demand is a price on risk. Strong companies borrow at five or six percent; when lenders want 10% or more, they are signaling a real chance they won't be repaid.
Multiply the rate by the debt and compare it with the cash the business actually makes.
Seen in: Saks Global (11% on $2.2B)
Stretching how long you take to pay vendors is a quiet way to borrow from them, without asking.
It buys time, but suppliers who aren't paid stop shipping, and that can start a spiral of emptier shelves and falling sales.
Seen in: Saks Global
New financing that lets some lenders jump ahead of others in the line to be repaid.
When creditors start competing over who gets paid first, they are usually preparing for a default.
Seen in: Saks Global
Rapid turnover at the top, especially right before or during a financial crisis.
Three CEOs in a few weeks means the question has shifted from how to grow to how to survive.
Seen in: Saks Global
When one company owns a brand and licenses it to a separate company that runs the stores, the operator pays fees to use the name on its own front door.
Great for the brand owner. For the operator it's another fixed bill on top of rent and payroll.
Seen in: Eddie Bauer
Losses that grow year after year instead of shrinking, like $2M, then $10M, then $82M.
One bad year can be noise. A widening trend means the cost base no longer fits the business.
Seen in: Eddie Bauer
A sale process where many buyers are contacted, some look at the books, and none make a qualifying offer.
It's the market's own audit: the people best placed to judge the numbers looked and walked away.
Seen in: Eddie Bauer (126 contacted, 0 bids)
Marketplaces often report the total amount flowing through them, even though most of it is passed on to someone else.
"$2 billion in revenue" can mean $2 billion flowing through, not $2 billion earned. Ask what the company actually keeps.
Seen in: Mercor
Taking one recent month (or quarter) of revenue and multiplying it to a full year.
Useful for fast-growing companies, but it assumes the best month continues for twelve. It is a projection, not a result.
Seen in: Mercor
A fortune based on what investors paid for a small slice of a private company, applied to the founder's entire stake.
It's real in that someone paid that price. It's paper in that it can move with the next deal, and can't easily be spent.
Seen in: Mercor · Surge AI · Satoshi Nakamoto
Private companies don't publish audited financials, so revenue and profit figures often come from leaks, interviews or analyst estimates.
Treat them as ranges, not facts, and check who is doing the estimating.
Seen in: Surge AI
Gaps in the checks that stop errors and fraud, such as one person able to approve their own payments, or identity checks that can be fooled.
Companies growing very fast often hire faster than they can check. When verification is the product, weak controls hit the core business.
Seen in: Mercor
Exposure that comes from suppliers, partners or software a company relies on but doesn't control.
You can lock your own doors and still be breached through a tool you didn't write.
Seen in: Mercor
No red flags match that search.
