The Accounting Review Vol. 33 No. 3 1958
CASH FLOW EARNINGS--NEW CONCEPTS IN SECURITY ANALYSIS.
Abstract
In recent years there has arisen a new challenge to accountants' determination of profits, and this has come from a more sophisticated group-that of the investment analysts. Prominent in many company analyses emanating from brokerage houses and investment advisory firms has been the term "cash flow." If a common stock is analyzed in terms of cash flow, it can be made to look absurdly cheap in terms of market price to cash flow ratio; when examined in terms of profits reached by accepted accounting standards, the stock may represent no more than average value. The term "cash flow earnings" is a misnomer. Because of variations in accounting practices, the consensus among security analysts is that reported earnings do not in every case provide a true picture of operations. In seeking a lamp of Diogenes to illumine the truth, security analysts have been forced to develop their own concepts of "correct" earnings. Thus has been born the term, "cash flow earnings." As yet, security analysts themselves have developed no hard and fast definition of "cash flow" earnings.
- DOI
- 10.2308/tar-7059527
- Volume
- 33
- Issue
- 3
- Pages
- 423-426
- Language
- en
- Sources
- openalex crossref