An assessment of a company's assets can be quickly carried out by looking at the Statement of Financial Position.
A Overdue loans that may not be recoverable. These could be over 90 days overdue (the number of days differs among companies).
B Loans that are likely to remain uncollectible and will be written off.
What are the risks?
Bad debts
Finance companies are in the debt business - so a soundly managed one will tell you upfront how good it is at chasing up bad loans.
A prospectus should list three types of bad debts. In the jargon of investment land, these are:
- impaired assets A
- past due assets
- bad and doubtful debtsB
Bad debts tell you the company has doubts about the quality of these parts of its assets. All companies will have some bad debts, but the fewer the better. To find out how you can tell about a company's bad debts, see Read the fine print.
Tip
An easy assessment of a company's assets can be quickly carried out by looking at the Statement of Financial Position. Divide the total liabilities by total assets - if the answer is more than one, the company has more debts than assets.
Important
Like you, we can't predict the future - which means we can't guarantee the performance of any company or investment. Consumer NZ does not endorse any specific company, scheme or investment. ConsumerSaver is a good starting point - but, before you commit, we strongly suggest you seek independent financial advice. See our full disclaimer.
