Does no one read this newsgroup?

I read this newsgroup. But I don't know much about accounting, and nothing at all about bankruptcy predictors. Luckily I don't make managerial decisions, either.

It's good to know somone on this group is so arrogant and all knowing that they can predict when someone will go bankrupt.

Maybe it is a self fulfilling prophecy, you predict they will go belly up so they feel there is now way out of the trap?

Maybe bankrupcy could be avoided if all knowing arogant people like you didn't force people into bankrupcy when they ill informed decision against them based on information they plucked out of the air or dreamed up last night in their sleep.

I have to wonder if the people around here at the local banks want people to fail and declare bankrupcy so they can swoop in and take the property and turn around and make a killing selling it. (Case in point: a local bank recently acquired by BOA who was found to have predatory lending practices.)

Around here the real estate market is red hot. A couple of years ago a bank could foreclose on a house for $200,000, now they can turn around and sell that house for $400,000 to $600,000 as the house values go through the roof.

"Wayne Brasch" wrote in news: snipped-for-privacy@enews1.newsguy.com:

I read the newsgroup, Wayne, and I remember you asking this question last year. Didn't see the point in re-creating that answer. The poster "DW" sure was an arrogant flamer, wasn't he?

Catherine

I know banks use bankruptcy predictors but I'm not sure how much it helps as small company financials are not "GAAP", -- inventory misstated, cash flow not provided, etc. and bank loan losses correlate with the economy. Having a predictor (assuming it works) still doesn't get more sales, government contracts, etc. Most business bankruptcies that I was familiar with knew they were in trouble long before not paying creditors but couldn't expand or cut expenses fast enough.

There are plenty of ways out of the trap, but the earlier you know that you are stepping into one, the more options you have to deal with it. When things are very late into the business crisis process, it becomes much more difficult to handle. These BK predictors are actually designed to be "early warning", like seeing a tumor right after it starts and before the problems have been felt.

Actually, the banks almost always lose money when they swoop in. They are not allowed to keep the profit. Bankers are a pain in the ass, because they try to be so careful, when a loan defaults, it usually costs them.

If they wanted to make money in real estate, they would loan money to a real estate investment company. When they foreclose, and they make a profit on the sale, the excess profit has to be returned to the property owner. The banks only receive their loan balance, past-due interest and penalties, and their other costs for handling the foreclosure. This is not a profit center for the bank, and a loan officer will not be viewed well if he has too many of them in his portfolio.

bank losses correlate with the economy, but that doesn't mean they can't be dramatically reduced. it helps to know which companies have a high failure potential so things can either be rectified or losses reduced.

Just because they didn't cut expenses fast enough, doesn't mean that they couldn't have. Expansion is not a good idea for a business that is in trouble. Usually it is better to make them smaller, more efficient.and with better financial controls. Once everything is in place and the business is throwing off cash, an expansion plan can be resumed.

DW, I am not an arrogant person. I am a person who truly cares about my clients and their financial health. I'm just saying if more people such as Cliff Rayman and myself would try to help small businesses as well as larger ones, there would not be so much bankruptcy for companies to have to try to work through. If a business person will allow someone like us help them, they can turn their business around before disaster strikes them.

I don't think that is arrogance. That is just a desire to help attitude I have.

Wayne

Catherine,

Thank you for your response. I am just trying to point out to all that things can be done to prevent so much business failure. I wish we would all adopt that desire to help attitude instead of just reporting to our clients by giving them their financial statements and leaving it at that.

Wayne Brasch

If they allow someone who knows what he/she is doing, the business can be turned around before trouble really presents itself to the owners. Accounting is a discipline that is powerful enough to help if the business owner will allow it to do so.

Wayne Brasch

These bankruptcy predictors I refer to do, in fact, work very well. You would be surprised if you were to ever put some companies financial data into one of them and see that they tell that company is in trouble long before it happens. A case in point is Enron. If you had taken their financial statements and run them through these predictors. you would have seen that even back then their chances of bankruptcy within three years was

100%.

Wayne Brasch

Hi Wayne,

OK, I'll bite....where would one find these predictors? My background is in corporate sales, where I did very well because I took a personal interest in helping my clients be successful in thier business. Now I am in the process of changing careers to accounting and I am getting ready to sit for the CPA exam (easier said than done at age 40!)

I would like to carry my consultative approach into my accounting career and really provide my future clients with a solid "value-added" package. I am interested in hearing more about this type of tool with the understanding that the real value is the use and interpretation of the data it provides. I have to say, however, that I was put off by this string with your initial post. I'll assume, for the time being anyway, that you are not an arrogant hot-head, just a bit frustrated. Maybe you should start a new string discussing the value of these predictors as you see it...I think there is a potential for a good discussion here....Just a thought...

bobbie

Bobbie,

I'm neither an arrogant hot-head nor a bit frustrated. I am concerned that so many accountants seem not to know nor care about trying to help their clients beyond providing financial statements. This was the reason I left a CPA firm and started my own practice back in 1980. All the firm I worked for at the time wanted to do was to finish a client's work as quickly as possible and run to the bank with their fee check from the work. They really seemed not to care about any client beyond getting that money. I don't deal with my clients in that manner. I care about each of them personally as well as in a business sense. They know and appreciate this. Consequently, the clients I started with back in 1980 are still very good clients and they are always recommending me to others. This, over the years, has kept me plenty busy. I have never had to pay a penny for advertising to keep earning the kind of money that has provided a comfortable level of living.

These bankruptcy predictors have been being developed since back in the

1960's. The first one was started by Dr. Edward Altman, a professor in New York. His is about 95% correct in its predictions.

An internet search for bankruptcy predictors should provide you with information on them. I can provide more information if you notify me by email.

Wayne Brasch

Human behavior being what it is, the access to knowledge has never stopped people from making unwise and potentially fatal decisions.

Ron,

You are right about that, but I believe accountants owe it to their clients to try to predict and prevent business disaster. That's what I do.

Wayne Brasch

Where do you get off making a charge like that?

For the record I have clients who in past years had to make emergency repairs on their house. The bank in question used predatory lending practices to get these people to sign loan agreements for like 35% that the bank knew the borrowers would never be able to repay.

To make a long story short the AG nailed this bank a number of times.

I would also add some of these people bought their houses for as little as $50,000 years ago and they are now being sold in a very hot real estate market for upwards of $500,000+.

I've found over the years for every well meaning accontant who wants to help there are a dozen con men working at banks, posing as insurance salesmen/financial advisors/etc. who would sell their mother into slavery if it would make them money.

I'm now older than dirt and i'm absolutely disgusted with how many con men are ready to swoop down like vultures in the name of helping their clients.

Around here we had alot of banks who ended up being taken over in the bank scandal a few years back, many of them diliberately set up loans so they would have to foreclose and acquire property in a very hot real estate market.

Now all these years later, many of the crooks got away with murder, alot of people stole alot of money, and i'm absolutley disgusted by it.

You may well be honset in your dealings with your clients. But i've come accross too many frauds over the years.

And you know what is the worst part of it? Many of these poeple are elderly victims who in earlier years would have spotted these cons a mile away. Now they are victims of extremely sophisticated con men. And some of these are in deep financial trouble now and no bankrupcy prediction scheme would have ever predicted this outcome.

DW,

I'm certainly not going to allow any of my clients to fall into theses types of situations you are talking about. They are very bad. You are right, too, in thinking that there are bad people in every profession-no matter which one. For my business clients I try to help them keep their businesses going since they put their time and efforts and money into them. The best way to do this is to present to them a narrative that tells them how they are doing and what they can do to help their business survive and grow the way they want to have it happen. Changes are their decisions after getting this information from me.

I have not meant to sound arrogant in any way in this thread, but I just know that accountants can do more to truly help their clients-and the clients deserve to know the accountant can help if allowed to do so. These bankruptcy predictors I have mentioned are what I use to try to help.

Wayne Brasch

Wayne Brasch wrote: ...

If one knew anything about Enron's business model it was clear imo...as simply a production lease-holder who happens to be in the area of oil/gas production and knew a little of many of the outfits (such as Northern Natural, for example) it was pretty clear that Enron was a shell far before then...

Dr. Woodard,

I tried to respond to the email you sent me about this topic of discussion. It was returned to me. What I tried to tell you in that email was that I provide bankruptcy prediction services for my clients at no charge. I do this for their good-not mine- despite what you think. I sell them nothing as I'm not trying to sell anything in this newsgroup discussion except the idea that accountants should learn about these predictors and use them to help their clients as I try to do.

For some reason, it seems to me that most of the people who read this newsgroup have no idea that such bankruptcy predictors exist and how accurate they really are.