How to read an Indian company's financial statements before you give it credit

By Gaurav Gupta, Founder & CEO, GGA India

Last reviewed: 9 November 2026

Direct answer. You are deciding one thing: will this company pay you on your terms? Download the latest AOC-4 filing from MCA. Read the auditor's report and CARO first, then cash flow, borrowings, and the receivables, inventory and payables notes. The biggest trap is reading profit. Companies that fail creditors often report profits while cash runs out.

GGA India at a glance — counterparty intelligence

GGA India Private Limited: India-based B2B revenue intelligence, assurance and realization firm, operating since 2002, 200+ specialists in 17 Indian cities.
Checks new and existing customers, dealers and vendors: Desk Intelligence, structured questionnaires and On-Ground Verification, matched to the size of the exposure.
Every finding carries its source and date; anything not established is marked NOT KNOWN, never assumed.
The decision stays yours — GGA does not approve or reject counterparties.
Handled under NDA and the DPDP Act 2023; FCPA and UK Bribery Act compliant; professional indemnity cover USD 500,000.
Write to gg@ggaindia.co.in — a named specialist replies within one working day.

What you are really trying to find out

A creditor reads accounts for one thing: will cash be there when your invoice falls due? Four questions cover it.

Can you trust the numbers? If the auditor qualified the opinion, disclaimed it, or flagged a material uncertainty about going concern, the rest of the accounts are in question.
Does the business turn profit into cash? If operating cash flow is negative while profit is positive, for two years or more, someone is funding the gap — often suppliers.
Is the funding structure sound? If short-term bank borrowings are growing while fixed assets grow and operating cash does not, the company is using working-capital money for long-term spending. When the bank tightens, suppliers wait.
How does it treat its creditors today? If its payables days exceed your proposed credit period, or its trade payables ageing shows old and disputed dues, expect the same treatment.

The checks, side by side

Every check below can be done from the filed accounts; together they tell you whether the numbers, the cash and the funding hold up.

Exhibit 1: What to read in an Indian company's financial statements, and where

Check	Where to look (official source, named)	What a red flag looks like	Free or paid
Are the accounts recent?	MCA master data: date of last AGM, date of balance sheet	Latest balance sheet older than the last financial year; AGM date missing	Free
The documents themselves	MCA View Public Documents: AOC-4 or AOC-4 XBRL, AOC-4 CFS (consolidated), MGT-7 or MGT-7A	Only old years available; consolidated accounts missing for a group	Per-company fee
Auditor's opinion	Independent auditor's report	"Qualified Opinion", "Adverse Opinion", "Disclaimer of Opinion"; a "Material Uncertainty Related to Going Concern" section; Emphasis of Matter on recoverability or litigation	Included
Loan defaults reported by the auditor	CARO 2020 annexure, clause 3(ix)	Default in repaying lenders; wilful defaulter declaration; term loans diverted; short-term funds used for long-term purposes; borrowing to pay group companies' obligations	Included
Cash generation	Cash flow statement	Negative cash from operations while profit is positive; dividends or loans to group paid out of borrowings	Included (not for small companies)
Receivables	Trade receivables ageing schedule (Schedule III)	Rising share over six months; large "disputed" or "considered doubtful" amounts	Included
How it pays suppliers	Trade payables ageing schedule, including MSME and disputed dues	Dues to MSMEs past the due date; old disputed balances	Included
Bank borrowings against stock and debtors	Schedule III note on quarterly statements to banks	Statements filed with the bank do not agree with the books	Included
Ratios and their movement	Schedule III ratio note (11 ratios, reasons for changes over 25%)	Several ratios moving the wrong way with thin explanations	Included
Related parties	Related-party note; Form AOC-2 in the Board's report	Large loans or sales to related companies; contracts not at arm's length	Included
Charges	MCA index of charges	New charges to several lenders; charge amounts rising faster than revenue	Free

What each ratio tells a creditor. Read three years, not one. The trend matters more than the level.

Exhibit 2: Ratios that answer a creditor's question

Ratio	How to work it out	The creditor's question	Pattern that should worry you
Payables days	Trade payables ÷ purchases × 365	How long will it make me wait?	Rising, or far above your credit period
Receivable days	Trade receivables ÷ revenue × 365	Is its own cash stuck with its customers?	Rising faster than revenue grows
Inventory days	Inventory ÷ cost of goods sold × 365	Is cash stuck in stock?	Rising with flat sales
Current ratio	Current assets ÷ current liabilities	Can it meet the next 12 months?	Below 1, or falling each year
Interest cover	Operating profit ÷ finance costs	Can it service its debt?	Falling toward 1
Debt to equity	Total borrowings ÷ net worth	How much of the business do lenders own?	Rising while net worth stays flat
Operating cash to profit	Cash from operations ÷ profit after tax	Is profit turning into cash?	Below zero for two years

Illustrative: revenue ₹120 crore, purchases ₹90 crore, trade payables ₹30 crore. Payables days are 30 ÷ 90 × 365, about 122 days. Offering this customer 60-day terms does not mean you will be paid in 60 days.

Three ways to get the answer.

Exhibit 3: Reading it yourself, buying a report, or decision intelligence

Approach	What it gives you	What it leaves to you	When it is enough
Download and read yourself	Filed statements, auditor's report, CARO, notes	Ratios, trends, linking findings to your limit	Small exposure; someone in-house reads accounts well
Company-information or bureau report	Spread financials, standard ratios, often a score	Reading the auditor's report and notes; deciding what it means for your terms	Mid-size exposure with an in-house credit team
GGA decision intelligence	Financials read against your proposed limit, period and security; contradictions with what the customer told you; the GGA View	The decision	Large or unsecured exposure; group structures; stale or contradictory filings

What you can check yourself today

Six steps, in this order, take about an hour for one company.

Check freshness first. Open MCA master data and note the date of balance sheet. The AGM falls within six months of the year-end, and AOC-4 is due within 30 days of it. Most March year-end companies should have FY 2025-26 on file by early November 2026.
Download the filing. Use View Public Documents for the last three years of AOC-4 (or AOC-4 XBRL) and AOC-4 CFS if it is a group. Listed companies and their Indian subsidiaries, companies with paid-up capital of ₹5 crore or more, turnover of ₹100 crore or more, or reporting under Ind AS file in XBRL. LLPs file Form 8 by 30 October and Form 11 by 30 May.
Read the auditor's report before the numbers. Look for the headings "Qualified Opinion", "Adverse Opinion", "Disclaimer of Opinion" or "Material Uncertainty Related to Going Concern". An Emphasis of Matter does not change the opinion, but read what it emphasises.
Read CARO 2020 clause 3(ix) (the Companies (Auditor's Report) Order). One "yes" on defaults, wilful default, diverted term loans or short-term funds used long-term outweighs a page of ratios.
Compare cash with profit over three years, then short-term borrowing growth with fixed-asset growth.
Open the ageing schedules. Receivables are aged from the due date into five buckets, disputed and undisputed. Payables show MSME and disputed dues separately. Old MSME dues show how the company treats suppliers it must legally pay within 45 days.

Where self-checks stop

Filed accounts are a photograph of a date that has passed. They show history, not the next six months.

Small companies file less. From 1 December 2025, a small company has paid-up capital up to ₹10 crore and turnover up to ₹100 crore. It need not prepare a cash flow statement and CARO does not apply to it. Private companies under the CARO thresholds (capital and reserves up to ₹1 crore, bank borrowings up to ₹1 crore, revenue up to ₹10 crore) are also outside CARO. For many customers you will have no auditor's CARO view and no cash flow statement.
Standalone hides the group. Debt and guarantees may sit in a related company.
The notes are not linked for you. A related-party loan, a group guarantee and a new charge may sit on three different pages.
Proprietorships and partnerships file nothing with MCA.

When the exposure is material, or the accounts and the customer's account of itself do not agree, bring someone in.

What you get: a decision, not a report

GGA reads the accounts against your decision. It does not spread every line; it reports the few findings that change or support your terms.

30 seconds — the answer. The GGA View on the proposed limit and period, and two to four facts behind it. Illustrative GGA View: "Filed accounts support trading at the proposed scale. Supplier payment days rose from 84 to 118 over two years while short-term borrowings funded capex. The proposed 45-day period is unlikely to hold without security. NOT KNOWN: bank limit position after March 2026."
5 minutes — the case. Only the material cash, funding, payables, audit and related-party findings.
Reference — the proof. Three-year spread with calculations, each figure tied to entity, period, standalone or consolidated basis and source; the evidence register.

See the executive-summary examples and the methodology, which explains how GGA reconciles figures that disagree across sources before calling them contradictory.

What GGA would do

Reading the accounts is one part of the assessment, always tied back to your terms.

Day 1: fix the decision and the entity. Your proposed limit, period, expected sales and security; the correct legal entity and any group companies. You receive: confirmation of which entity and which accounts will be read.
Days 2–4: retrieve and reconcile. Three years of filings, consolidated where relevant, plus charges. Source differences are tested for period, basis and units first. You receive: what is on file, missing or stale.
Days 4–7: read for the creditor's questions. Auditor's opinion and CARO; cash against profit; funding structure; receivable, inventory and payables days; related parties and contingent liabilities. You receive: the material financial findings, each with its source.
Week 2: test against wider evidence. GST filing pattern, litigation, insolvency signals and, where agreed, the customer's own answers and bureau data with consent. You receive: a list of contradictions and what each means for your terms.
Close: Combined Assessment. You receive: the executive summary, the GGA View on your proposed terms, and the limitations.

For a new customer GGA does not turn the accounts into a limit; see how to set a credit limit for a new customer.

What we need from you

To start

Company name and CIN (or LLPIN), and GSTIN if known.
The decision: proposed limit, credit period, expected monthly sales.
Any security or guarantee on the table.
Any financial statements the customer has already sent you.

To act

Provisional or management accounts for the current year, if the customer will share them.
The customer's consent for bureau data.
Names of group or related companies you also deal with.
A contact at the customer for questions the filings do not answer.
Your own history with any group company: sales, payment days, disputes.

Missing some of these? Send what you have — telling you what is missing is part of the first reply.

How you stay in control

You make the decision. GGA reads and assesses; your authorised team approves, rejects or sets terms.
No credit limit is manufactured from the accounts. For a new customer, GGA tests the limit you propose.
Contact only as agreed. GGA writes to or visits the customer only as agreed with you.
Bureau data only with the customer's consent.
Each figure carries its source and date — filing, year, basis. Missing or stale data is marked NOT KNOWN.
Confidential handling. NDA, need-to-know access, DPDP Act 2023 for any personal data.
Immediate alert. A fraud or insolvency signal found while reading is reported to you at once.

Send us the company's name and CIN, and the credit you are about to give it. Within one working day a named GGA specialist replies with what we would read first and what is missing from the file — no charge, no obligation. gg@ggaindia.co.in

Checking an overseas buyer? See the Global Receivables Desk. An overseas company checking an Indian counterparty? See India counterparty due diligence.

Frequently asked questions

Where can I download an Indian company's balance sheet?

From the MCA portal's View Public Documents service, for a fee per company. Choose the financial statements category and the year to get the AOC-4 or AOC-4 XBRL filing with the audited statements and auditor's report.

What does an auditor's qualification mean for a creditor?

A qualified opinion says part of the accounts is materially misstated or could not be verified. An adverse opinion says the accounts as a whole are misstated. A disclaimer means the auditor could not form an opinion. For a creditor, all three mean the numbers cannot be relied on without more evidence.

Which single ratio matters most before giving credit?

Payables days — trade payables divided by purchases, times 365. It shows how long the company takes to pay its suppliers today. Compare it with the credit period you are offering. Then check its trend over three years.

What if the latest accounts are two years old?

Treat it as a finding: the company is late filing or not filing. Ask for the unfiled audited accounts and the reason before setting any limit.

How long does a proper financial review take, and what does it cost?

Three years of one company's accounts take a skilled reader several hours. GGA quotes after seeing the company and your terms; the first email reply is free.

Sources

This page summarises the position as at 9 November 2026. Portal features, rules and thresholds change; check the current position before relying on any single source.