Creative Cash Flow Reporting and Analysis: Uncovering Sustainable Financial Performance Hardcover – 11 Feb 2005
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From the Inside Flap
Contrary to popular opinion, managers have a degree of discretion in reporting operating cash flow. In this era, when the trustworthiness of reported earnings is in question, a reliance on as–reported operating cash flow is not the convenient substitute measure of financial performance that it might appear to be.
Creative Cash Flow Reporting: Uncovering Sustainable Financial Performance identifies how the routine application of either current accounting standards or other measures employed by some companies can yield misleading operating cash flow statements in financial analysis.
When adjusted using the methods described in this clear guide, operating cash flow is a more effective tool for uncovering reported earnings that have been increased through questionable means. Premature or fictitious revenue will result in growing receivables but not cash. Also, steps taken to misstate inventory might boost gross profit and net income but will not reflect cash flow. The same is true about aggressive cost capitalization and other creative accounting acts.
Creative Cash Flow Reporting demonstrates how to use adjusted operating cash flow to uncover earnings that have been misreported by even the most aggressive and fraudulent accounting practices.
Real–world practice is demonstrated through the results of a study designed to adjust the cash flow statements of the S&P 100 for the years 2000, 2001, and 2002. Many companies included in this sample had significant differences between reported and adjusted operating cash flow. The book is illustrated using hundreds of actual and recent company financial reports and applies recommendations to a large sample of actual companies.
Creative Cash Flow Reporting: Uncovering Sustainable Financial Performance is a must–have reference for serious readers of financial statements, including equity analysts and investors, credit professionals, serious individual investors, professional money managers, and anyone interested in uncovering true sustainable financial performance.
From the Back Cover
Praise for Creative Cash Flow Reporting
"With Creative Cash Flow Reporting, Charles Mulford and Eugene Comiskey have established themselves as the Graham and Dodd of sniffing out financial shenanigans. This book is destined to become a classic―it is the last word on cash flow."
―Herb Greenberg, Senior Columnist, CBSMarketwatch.com
"The combination of academic rigor with excellent accessible writing and explanation on display makes this book extraordinarily valuable for investors of any skill level."
―Bill Mann, Senior Editor, Investing, The Motley Fool
"Creative Cash Flow Reporting is destined to become the gold standard in the field of forensic analysis of corporate cash flow."
―Thornton L. O′glove, founder, Quality of Earnings Report
"With this book, professors Mulford and Comiskey take popular analytical dogma about cash flow reporting and stand it on its head: cash flow can be manipulated."
―Jack Ciesielski, Publisher, The Analyst′s Accounting Observer
"I always assumed that operating cash flow was the last word when it comes to evaluating a company′s results. No more! Mulford and Comiskey′s latest effort opened my eyes to what really counts: sustainable cash flow."
―Harry Domash, Publisher, Winning Investing newsletter; Investing columnist, San Francisco Chronicle, MSN Money
"Mulford and Comiskey have created another superb guide for serious users of financial statements. This book should be a companion for anyone examining the quality and sustainability of a firm′s earnings and cash flow."
―Mark N. Hurley, Head, Global Risk Education, JPMorgan Chase
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Most Helpful Customer Reviews on Amazon.com (beta)
What about earnings supported by artificial means? What are the core drivers of cash flows? What should our view be, vis a vis the Operating Cash flows, regarding non recurring charges and depreciation? Are capital expenditures really as cut and dry as we like to think they are, under GAAP? How does it impact our cash flows, in the real world? How is it sometimes manipulated, to distort the underlying cash flow realities?
If you are a financial or accounting professional, read this book. Read it twice. Read it three times. An absolutely extraordinary book. Well written, insightfull, never boring, always intriguing with unique content. The authors have such an extraordinary grasp of accounting and financial flows, and bring such groundbreaking concepts and ideas to the field, that you won't put this book down, and there are not many accounting or finance books we can say that about !! "Creative Cash Flow" by Mulford and Comiskey is absolutely a virtuoso performance. Amongst, and compared to, the entire literature that exists in the field of accounting and financial analysis, this book is an extraordinary achievement.
Cash flow exhibits are illustrated and discussed throughout the book with large corporations that you will immediately recognize.
As I began to read this book, I became very aware that these authors are intensely well versed in this field. It states on p 32 that "by now the reader should be well aware that reported cash flow is not necessarily what it seems." As the reader I would agree with this statement. I read this book as part of a CPE class. This was a win win opportunity for me. I earned credits and learned about cash flow statements shenanigans.
Other notes worth mentioning:
p254-257 has an exhibit of a Sustainable Operating Cash Flow Worksheet to assist the reader on their understanding of "organizing and recording non-operating & nonrecurring items of operating cash flow.
Chp 8 - Using operating cash flow to detect earnings problems-discussion includes cyclical developments and life cycles of an organization.
p 290-300 ECM- excess cash margin is discussed as a beneficial statistical measure when analyzing a cash flow payment. p 294 states "it is the most effective in uncovering reported earnings that have been boosted by artificial means". p297 mentions that "ECM provides a useful alert mechanism for identifying developing problems early."
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