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>In any one month... Pretty much everything you mention in this paragraph is covered by accounting rules a student would learn in year 1. Cash flow isn't prof
by hnnewguy 12y ago
>In any one month...
Pretty much everything you mention in this paragraph is covered by accounting rules a student would learn in year 1. Cash flow isn't profitability. Spending on assets is capitalized, and they depreciate according to rules, not what you "may want" to do.
Yes, there is always some leeway to play fast and loose with accounting, and companies are always trying "adjust" earnings to suit to their business model. 4 times out of 5, it's horsecrap. That's why we have GAAP.
- goodcanadian 12y agoSure, but to take depreciation as an example, the rules do not necessarily match reality. Sometimes an asset's practical life is longer than the rules allow, sometimes it is less. These factors do not just depend on the asset, itself, they depend on how the asset is used. If a company goes under, the resale value of the asset may be worth more or less than its carrying value depending on outside economic conditions, technology changes, or what have you. Even the most earnest accountant can get things very wrong.
- skywhopper 12y agoYep, that's the point I was trying to make. Most people, presumably including the parent commentator, have not taken any accounting, and don't think about all the simple, obvious examples I listed.