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Module 7 of 8 in Fundamental analysis

Governance, capital allocation and red flags

Judging management and governance, how capital is allocated, related-party transactions, pledged promoter shares and accounting red flags.

Lessons
7 ready
Time
About 42 minutes
Module test
10 questions from a bank of 33, pass mark 80%

7 lessons in this module. Progress is saved in your browser as you go.

0 of 7
Start with: Management quality and corporate governance

A business can be excellent and still be a poor investment for minority shareholders if the people controlling it act in their own interest. This module covers what good governance looks like, how to judge capital allocation, and the disclosures and accounting patterns that should make you look harder.

By the end of this module you should be able to

  • Evaluate management, board independence and governance practices from public disclosures.
  • Judge capital allocation decisions such as acquisitions, buybacks, dividends and reinvestment.
  • Explain the risks of related-party transactions, promoter pledging and group structures for minority shareholders.
  • Recognise accounting red flags and explain why each needs further investigation rather than an instant conclusion.

Lessons in order

  1. Management quality and corporate governance6 min
  2. Capital allocation6 min
  3. Related-party transactions6 min
  4. Promoter pledging6 min
  5. Minority shareholders, holding companies and conglomerates6 min
  6. Financial red flags6 min
  7. Accounting manipulation and fraud indicators6 min
  8. Module test: Governance, capital allocation and red flags10 questions

Module test

10 questions, chosen at random from a bank of 33 questions and balanced across this module's learning goals and difficulty levels. Every question comes with an explanation. You need 80% to pass, and you can retake it as often as you like with a fresh set of questions.

Go to the module test Practise first

This module builds on

Key terms in this module