Signals on the balance sheet
- Negative equity — debt exceeds assets. The most serious single signal.
- Equity falling several years in a row, especially if the decline is accelerating.
- A liquidity ratio below 1 without a business model that explains it.
- Growing short-term debt — can suggest suppliers and tax authorities are being used as a credit line.
Signals in the income statement
- Losses several years running — one bad year is not a trend, three are.
- Falling gross profit while activity is unchanged — margins are under pressure.
- Results carried by one-off items rather than operations.
Keep the context from How to read a Danish annual report in mind: smaller Danish companies do not show revenue, so a missing turnover figure is not a signal in itself.
The auditor's report — the most important page
The auditor's report is the closest you get to an independent assessment. Look for qualifications, emphasis on going-concern uncertainty, and remarks about unlawful loans to management. Note at the same time that many small companies have lawfully opted out of audit — that is normal and not a warning sign in itself.
Signals outside the accounts
- A late or missing annual report — if the deadline is exceeded substantially, the Danish Business Authority can ultimately send a company into compulsory dissolution.
- Frequent changes in management or the board.
- A change of auditor — especially mid-period.
- Repeated address moves, or sudden changes of industry code and name.
How to weigh the signals
No single signal is a conclusion — it is the combination and the direction that count. A company with falling equity, a delayed report and an auditor reservation at the same time deserves far more caution than one with a single weak ratio. Use the signals as a reason to ask questions: request an explanation, adjust the credit terms, or run the routine in Credit-check a supplier before you sign. And repeat the check over time — signals build gradually.
Riskpilot shows register data and computed ratios — not a credit rating and not advice.
Frequently asked questions
Is one bad year a warning sign?
Rarely on its own. Look at the development over several years and whether equity is still solid. Three bad years in a row, on the other hand, are a trend.
What does going-concern doubt mean?
That the auditor is flagging material uncertainty about whether the company can continue operating for the next twelve months. It is one of the most serious signals in an annual report.
Is opting out of audit a red flag?
No. Many small companies have lawfully opted out of audit. It only becomes a signal when a company drops its auditor at the same time as other signs of weakness appear.
What should I do when I see several warning signs?
Ask questions before you act: request an explanation, consider shorter credit terms or prepayment — and revisit the profile when the next annual report is published.