Reference: The Red-Flag Checklist

Every pattern the course flags as worth a second look, turned into a question you can ask about any company's statements — not just Safaricom or Equity Group. Tick the box, then go find the number.

Does profit move the same direction as revenue?

Is revenue up but profit down — and if so, which cost line grew faster than revenue?

Check: revenue growth % vs. profit-for-the-year growth %

Safaricom FY2024 — revenue +12.4% (310,904.8 → 349,447.2) while profit fell −18.7% (52,482.8 → 42,658.4), traced to D&A nearly doubling (54,865.0 → 82,948.0).

Does profit move the same direction as operating cash flow?

Is profit rising (or strong) while net cash from operating activities is flat, falling, or negative?

Check: profit for the year vs. net cash from operating activities, same period

Safaricom FY2024 — the reassuring case: profit 42,658.4 well below operating cash flow 107,923.6. The concerning direction is the reverse (profit strong, cash weak).

How much of profit before tax is non-cash and non-operating?

Strip out one-off gains, fair-value adjustments, and currency/inflation restatements — how much of profit before tax is left?

Check: PBT minus the one-off/non-cash item, as % of reported PBT

Safaricom FY2024 — hyperinflationary monetary gain (IAS 29) of 22,363.2 was ~26% of PBT 84,687.4; adjusted PBT ≈ 62,324.2.

Is the "profit" figure the one shareholders actually got?

If there are non-controlling interests, are you reading "profit attributable to parent," not total group profit?

Check: total profit for the year = attributable to parent + NCI share

Safaricom FY2024 — total profit 42,658.4 split into attributable-to-parent (own shareholders) vs. NCI; using the wrong figure over/understates what shareholders received.

Are you comparing like with like across business models?

Is this ratio being judged against a company with a fundamentally different business model (bank vs. telco)?

Check: same ratio, same industry, before drawing a "high/low" conclusion

Safaricom vs. Equity Group — debt-to-equity 0.32 (telco borrowings) vs. 6.31 (bank total liabilities, since deposits are the business). ~20x gap reflects industry, not danger.

Is a "weak" liquidity ratio actually backed by strong cash generation?

Before calling a current ratio below 1.0 a problem, is operating cash flow strong and steady enough to cover near-term bills anyway?

Current ratio = current assets ÷ current liabilities

Safaricom FY2024 — current ratio 0.49, below 1.0, but backed by 107,923.6 in operating cash flow — not automatic distress.

Do the two sides of a share-price ratio actually belong to the same period?

Is a current share price being divided by an EPS or dividend figure that's stale, pre-split, or from a different period?

P/E = share price ÷ EPS · Dividend yield = dividend per share ÷ share price

Safaricom — mid-2026 price 35.95 ÷ pre-split FY2024 EPS 1.6 ≈ 22.5x, flagged as stale/illustrative rather than a clean read.

Is a high dividend yield generosity, or a falling share price?

Has the yield risen because the dividend grew, or because the share price fell (which inflates yield mechanically)?

Check: trend in dividend per share vs. trend in share price, separately

Safaricom FY2025 — yield ≈7.27% with an 83.68% payout ratio: high payout leaves little room to sustain the dividend if profit dips.

Are you confusing percentage points with percent?

When two percentages are compared, is the gap reported in percentage points, not percent?

Check: margin_2 − margin_1 = percentage-point change, not a % change

Safaricom — net margin fell from 16.9% to 12.2%: a 4.7 percentage-point drop, not "a 4.7% drop."

Are the units actually what the label says?

Is this figure in millions or thousands — and does it match the other figure you're dividing it by?

Check: unit label on every statement before combining two companies' numbers

Safaricom vs. Equity Group — Safaricom reports KShs millions, Equity Group reports Shs'000: an easy off-by-1,000 mistake if unchecked.

Are you checking the price before the business earns the right to be checked?

Have profitability, cash backing, and balance-sheet soundness already passed, before P/E or yield enters the conversation?

Order: profit & cash → red flags → margins/ROE → leverage/liquidity → then price

Course capstone (Lesson 20) — "Cheap price, weak business, is not a bargain." A low P/E on a company that fails the earlier questions isn't a bargain.

Every question above traces back to a specific lesson's worked numbers — see lessons/0001–0020 for the full derivations. This card only asks the questions; it doesn't hand you the verdict.

The Red-Flag Checklist