Nonprofit Blog

Many companies report financial metrics that don’t conform to U.S. Generally Accepted Accounting Principles (GAAP), such as earnings before interest, taxes, depreciation and amortization (EBITDA), in their business plans and other promotional materials. These figures can sometimes cast a more favorable light on the borrower’s historic and prospective operations than the GAAP figures do. So, do your homework before banking on non-GAAP metrics.

Financial statement footnotes can provide a wealth of useful information. Too often, however, no one bothers to read them. Experienced bankers know to look beyond the numbers and read the footnotes to find out qualitative details and narrative disclosures, as well as what’s not being said. Omissions often forewarn of financial uncertainty and even fraud. Here are some examples that bankers should watch out for.