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How can you make a $45 million profit when you lose $30 million in cash???

Despite declaring a $45 million profit in 2008, Timbercorp actually had a $30 million cash deficit from their day-to-day operations.

How?

Year after year Timbercop had negative operating cash flow but declared strong profits. The warning signs were in the cash flow statement well before things went downhill.


In this resource we consider the Timbercorp Limited Financial Statements in their final year before going bust. In the first instance, the profit results appear to be an incredibly healthy looking set of numbers. Nearly half a billion dollars in revenue and return on sales of nearly 10% with net profit close to $50 million. By examining these results and contrasting them with the income statement you can get a sense of what is similar and where to look for discrepancies.

Timbercorp snapshot

 

 Cash Flows Part II: Analysing the cash flow statement

March 1, 2015

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