In a previous post (Part I), I introduced the idea of the Cash Flows Statement reluctantly trapped in a Cinderella existence. But, with a little understanding, it doesn’t have to stay that way.
“Cinderella” (from Merriam Webster)
- “someone or something that is ignored but that deserves attention or credit”
- “someone or something…that is not expected to do well but that succeeds or wins in a very exciting way”
OK, so maybe the second bullet is a little over-the-top for a financial statement, but you get the point.
I was reading an article about Groupon’s problems on CFO.com, “Groupon’s Use of Non-GAAP Measures Questioned,” which questions where Groupon’s cash is coming from, “Are the cash flows coming from the liquidation of receivables? Are they coming from the sale of something? Or are they coming from the fact that [Groupon] didn’t pay its bills?” The point being that Groupon’s cash flow statement is somewhat unclear, which presents a problem to strategic planning and management. I firmly believe the cash flow statement is key to understanding what is going on at your business, so what’s your statement of cash flows telling you?…