Occupational Fraud

The pie charts below were created using Google’s Chart Tools.

The first chart shows the approximate frequency in 2010 of the three principle methods of occupational fraud (fraud against a company committed by employees). Asset misappropriation is where an employee steals or misuses company resources. Corruption is where an employee corrupts a business transaction for benefit. And, financial statement fraud is the misstatement of financial reports to mislead users.

The second chart shows the approximate frequency in 2010 of the five principle ways in which employees misappropriated company assets for the employee benefit.

The third chart shows the five most frequent methods in 2010 that occupational fraud was detected. Receiving a tip about the fraud was by far the most frequent (40% of the detections). Three of the five most frequent detection methods can be initiated by the company (management review; internal audit; and account reconciliation). “Other” includes: document examination; external audit; surveillance/monitoring; notified by police; confession; and IT controls.

The data in the graphs were obtained from the “Report to the Nation on Occupational Fraud and Abuse – 2010” published by the Association of Certified Fraud Examiners. Click here to go to the report (PDF file).

Effective Tax Rates for Small Businesses by Entity Type

The graphs below were created using Google’s graph tool.

The vertical bar graphs show the effective tax rate for small businesses by the entity type of the small business (sole proprietorship – nonfarm; partnership; S corporation; and C corporation).

Details behind the percentages are in a 2009 study done by Quantria Strategies, LLC for the US Small Business Administration. The study can be read by clicking here (PDF file). The study defines a small business as a business having less than $10,000,000 in gross revenues.

A separate graph is presented for C corporations because the effective tax rate for C corporations should not be compared to the effective tax rates for the other business entities. The reasons for this is that the C corporation tax rate does not include income taxes that owners pay on the salaries they receive from the corporation and the effective tax rate does not include taxes on dividends that owners receive from the corporation.

Working Capital as a Percentage of Sales

The horizontal bar graph shows the working capital balance as a percentage of sales for 10 business sectors.

The graph was generated using data at Aswath Damodaran’s website. Go to this website by clicking here. At the website, click the “Corporate Finance” button, then go down the page to the Valuation section and click “Working Capital by Sector” next to Data Sets.

The data on the graph and at Damodaran’s website can be used by companies to compare their working capital balance as a percentage of sales to the average in their business sector.

Cash Balance as a Percentage of Income

The graph below was created using Google’s graph tool.

The horizontal bar graph shows how much cash is kept on hand as a percentage of sales for 10 business sectors.

The graph was generated using data at Aswath Damodaran’s website. Go to this website by clicking here. At the website, click the “Corporate Finance” button, then go down the page to the Valuation section and click “Working Capital by Sector” next to Data Sets.

The data on the graph and at Damodaran’s website can be used by companies to compare their cash on hand as a percentage of sales to the average in their business sector.

Net Income as a Percentage of Sales

The graph below was created using Google’s graph tool.

The horizontal bar graph shows the net income as a percentage of sales for 17 business sectors.

The data used in generating the graph is from Professor Aswath Damodaran (New York University)'s website. The data can be viewed by clicking here. Click here to go to Professor Damodaran’s home page.

The data shown in the graph should be useful to business owners who want to compare their net income to net income of similar companies.

Allowance for Bad Debt as a Percentage of Sales

The graph below was created using Google’s chart tool.

The vertical bar graph shows the allowance for bad debt account balance (used by companies at the end of the year) as a percentage of sales for 11 business sectors.

The data used to create the graph was taken from Internal Revenue Service statistics on form 1120s filed corporate returns for 2008. This data can be viewed on the IRS report “2008 Statistics of Income – Corporation Income Tax Returns” by clicking here (PDF file). Business receipts were used for sales. Data was used only for corporations reporting a positive net income.

The percentages are for all size companies and all subsectors, so represent an approximate benchmark average that companies can use to evaluate their own allowance for bad debt account balance to sales ratio compared to somewhat similar companies. Subsectors exist for some of the sectors, so a more similar company comparison might be available. The overall average percentage for all sectors is 0.5%.

Inventory as a Percentage of Sales

The graph below was created using Google’s chart tool.

The horizontal bar graph shows the inventory balance (at the end of the year) as a percentage of sales for 11 business sectors.

The data used to create the graph was taken from Internal Revenue Service statistics on form 1120s filed corporate returns for 2008. This data can be viewed on the IRS report “2008 Statistics of Income – Corporation Income Tax Returns” by clicking here (PDF file). Business receipts were used for sales. Data was used only for corporations reporting a positive net income.

The percentages are for all size companies and all subsectors, so represent an approximate benchmark average that companies can use to evaluate their own inventory to sales ratio compared to somewhat similar companies. Subsectors exist for some of the sectors, so a more similar company comparison might be available.