No. of Recommendations: 0
Hi everybody,

My usual procedure is to try to smooth out any one time oddities in dealing with cash flow. An example sometimes is deferred revenue.

In this case if the $36 mill is not typical of the amount of deferred revenue usually carried on the books, then I would back out the excess by reducing the deferred and crediting cash.

Otherwise, you get a series of cash flow statements that may be significantly distorted because of a non recurring timing issue. For example, say the company received the $36 million in the last week of 1Q for a job taking approximately 9 weeks starting the 1st week of 2q.

The 1q cf will show an additional $36 million cash from operations that will be reduced in 2q by the costs of the project. Since there should be some cost to the project, 1q cf could be misleading without some adjustment for analysis.

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.