M-Score, the indicator that predicted Enron’s bankruptcy predicts a dark future for the economy

Based on their past successes, there are plenty of reasons to be scared. The M-Score indicator , which predicted the implosion of the energy giant Enron , indicates that the collective probability of fraud among major companies is the highest in the last 40 years . The M-Score is a technique for detecting accounting fraud, which was developed by Messod D. Beneish, professor at Indiana University, in the 1990s. The CNMV creates a collaboration platform with RTVE, Google and banking associations to combat financial fraud in the face of the rise of crypto assets It is used to find any type of manipulation in the financial statements of companies , through 8 ratios, for example, if a company begins to announce that it is owed more and more money, or if it reports very high values ​​of assets that They cannot be sold.

Chances of fraud increase before economy hits recession

This information is extracted from what companies publish quarterly and is compared with that of previous years. Using this metric, a series of worrying conclusions are reached, which have been shared with The Wall Street Journal . The aforementioned media indicates that several co-authors have analyzed the behavior of almost 2,000 companies Honduras Mobile Number Database and there is a “disturbing pattern”, which causes the collective probability of fraud among large companies to be the highest in the last 4 decades. And, they warn in WSJ : “The possibilities of manipulation increase in the quarters before the economy enters a recession .” In the same article, Dr. Lee, a professor at the University of Washington, points out that strange data in any of the 8 metrics does not have to mean that problems are coming.

 

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The Enron case: one of the biggest financial frauds

But the risk increases when there are several ratios that give the alert. As happens on this occasion. The creator of the system himself, Dr. Beneish, also comments that false information in balance sheets has “real economic effects, because it involves erroneous information and, on it, companies base their investment, hiring and production decisions .”  of all time Austria phone number list When it comes to fraud in large companies, it is impossible for the Enron case not to come to the fore , without a doubt, one of the biggest financial frauds in history. This Houston electric company suffered a resounding collapse in 2001, after a failed merger. Until that moment it was the largest bankruptcy ever declared in the United States . Enron committed fraud by overstating its profits. Many executives were found guilty of various crimes, from obstruction of justice to money laundering.

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