Communiquez avec les autres et partagez vos connaissances professionnelles

Inscrivez-vous ou connectez-vous pour rejoindre votre communauté professionnelle.

Suivre

Is it possible for a company to show positive cash flows but be in grave trouble?

user-image
Question ajoutée par SHAHZAD Yaqoob , SENIOR ACCOUNTANT , ABDULLAH H AL SHUWAYER
Date de publication: 2016/06/21
Duncan Robertson
par Duncan Robertson , Strategy Consultant , Duncan Robertson Consultancy

Oh yes.  Oh yes it is.  History has many examples.

Aside from fraud, which is a quick and easy way of achieving what you describe, the cash flow statement is the part of the accounts which has gone through most accounting processes and is therefore the furthest removed from reality.

Additionally, the cashflow is a purely historical statement - it has no predictive capacity.  Even at its best, it's only trying to measure liquidity and does not attempt to consider solvency.  In other words, a company that borrows more and more money and gets further and further into unsustainable debt will have great cashflow.

In the earlier part of my career I analysed the accounts of many, many hundreds (perhaps thousands) of companies.  I never once looked at a cashflow statement.

 

More Questions Like This