The Profit to Cash Report

Some say Cash is King but what does that really mean? Apple released their earnings this week and everyone is gitty over the profit results since they beat the street’s expectation. The important question is did they generate any cash? Yes, Apple generated lots of cash, 59.7 billion to be exact over the last twelve months. The levels of cash in a business determine the ways a company can operate and the strategy it must deploy in the market. A cash poor company must do everything it can to conserve cash and maximize float. A cash rich company can use its cash to leverage better pricing from suppliers and thus increase profit.  Your financial review need include cash performance.

Unfortunately the Statement of Cash flow is too confusing for non-financial managers.  For this reason the Profit to Cash Report is a tool that merges together the income statement with the statement of cash flow.  With this a manager gains the perspective of real cash from sales, operating expenses, and investment activities.  Looking merely at the income statement management could be delusional and pat themselves on the back for a stellar sales record awarding bonuses all around and champagne.   In reality the statement of cash flow will show that all of those sales went to accounts receivable so the company has no cash and can barely make payroll.   Maybe cost of goods sold is down and margins are through the roof because of a bulk inventory buy that has all of the company’s cash tied up in inventory and sitting on the shelfs.  Merging the income statement and statement of cash flows may be a bit unorthodox, yet gains the complete view of the moving parts with the operations.

The Profit to Cash Report:  PDF File – Excel File


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