EBIX case study
Ebix: the master of Fraud
Ebix Inc. is a supplier of software to the insurance industry. Specifically, Ebix has enjoyed phenomenal growth on both the top and bottom lines over the past number of years. Despite this rosy picture, Ebix has been plagued over the past couple of years with some bad press that Ebix was to be probed by the SEC for accounting malpractices and that Ebix made many amendments for its financial reports in 2011. This article will focus on accounting issues and problems of Ebix, using what we have learned in financial statements analysis combined with financial statements before problem-year to identify Ebix’s problems, to verify issues in problem-year and to analyze operational performance.
Our project is made up of Ebix’s main problem-acquisition and cash flow, financial frauds and aggressive accounting methods, financial ratios analysis and exhibit used to help analyze.
Our report will detail:
1) The Game of Acquisition & Its "roll-up" Strategy. The millions of "value creation" imbedded in EBIX's valuation are likely to collapse given the myriad of issues the company currently faces.
2) Consolidated Statement of Cash Flow or No Lasting Cash Flow? Investors have a distorted view of the company's cash flow. "Our cash-generating rate continues to increase. The story of Ebix is a cash story." said Robin Raina, the chairman and CEO of Ebix. If we only focus on Cash flows from operating activities part of Consolidated Statements of Cash Flows, it appears that Ebix has been doing a good job generating cash from its primary business. But after a careful analysis, we discover the truth is that Ebix has not generated lasting cash flow since 1999.
3) Financial frauds and Aggressive accounting issues. Apparently, Ebix is good at manipulate financial statements. By using several accounting gimmicks, Ebix can boost up its revenue and show good numbers in margin and growth rate, which caught the eyes of the impatient investors who don’t see the
Ebix Inc. is a supplier of software to the insurance industry. Specifically, Ebix has enjoyed phenomenal growth on both the top and bottom lines over the past number of years. Despite this rosy picture, Ebix has been plagued over the past couple of years with some bad press that Ebix was to be probed by the SEC for accounting malpractices and that Ebix made many amendments for its financial reports in 2011. This article will focus on accounting issues and problems of Ebix, using what we have learned in financial statements analysis combined with financial statements before problem-year to identify Ebix’s problems, to verify issues in problem-year and to analyze operational performance.
Our project is made up of Ebix’s main problem-acquisition and cash flow, financial frauds and aggressive accounting methods, financial ratios analysis and exhibit used to help analyze.
Our report will detail:
1) The Game of Acquisition & Its "roll-up" Strategy. The millions of "value creation" imbedded in EBIX's valuation are likely to collapse given the myriad of issues the company currently faces.
2) Consolidated Statement of Cash Flow or No Lasting Cash Flow? Investors have a distorted view of the company's cash flow. "Our cash-generating rate continues to increase. The story of Ebix is a cash story." said Robin Raina, the chairman and CEO of Ebix. If we only focus on Cash flows from operating activities part of Consolidated Statements of Cash Flows, it appears that Ebix has been doing a good job generating cash from its primary business. But after a careful analysis, we discover the truth is that Ebix has not generated lasting cash flow since 1999.
3) Financial frauds and Aggressive accounting issues. Apparently, Ebix is good at manipulate financial statements. By using several accounting gimmicks, Ebix can boost up its revenue and show good numbers in margin and growth rate, which caught the eyes of the impatient investors who don’t see the