Watch Cash Flow

I understand the fundamental meaning of cash flow. Being a middle-aged college student means, simply, that there ain’t no cash coming in, and there is a lot of cash flowing out. What I have not really understood until recently is the financial concept of cash flow. Not to worry, though; Dr. Evans is making damn sure every student in her class has a very clear understanding of the cash flow principles in our corporate finance textbook (you remember, the book I bought online and had shipped from India).

What a surprise then, after slogging through the text, working the examples, studying the powerpoint, and using the online study aids, that the final words of the introductory chapter on cash flow should be a poem. Not a literary milepost, for sure, but a tale to remind the budding business-people that the subject does carry some weight in their futures.

Quoth the Banker, "Watch Cash Flow"

Once upon a midnight dreary as I pondered weak and weary
Over many a quaint and curious volume of accounting lore,
Seeking gimmicks (without scruple) to squeeze through
Some new tax loophole,
Suddenly I heard a knock upon my door,
Only this, and nothing more.

Then I felt a queasy tingling and I heard the cash a-jingling
As a fearsome banker entered whom I’d often seen before.
His face was money-green and in his eyes there could be seen
Dollar-signs that seemed to glitter as he reckoned up the score.
“Cash flow,” the banker said, and nothing more.

I had always thought it fine to show a jet black bottom line.
But the banker sounded a resounding, “No.
Your receivables are high, mounting upward toward the sky;
Write-offs loom.  What matters is cash flow.”
He repeated, “Watch cash flow.”

Then I tried to tell the story of our lovely inventory
Which, though large, is full of most delightful stuff.
But the banker saw its growth, and with a might oath
He waved his arms and shouted, “Stop!  Enough!
Pay the interest, and don’t give me any guff!”

Next I looked for noncash items which could add ad infinitum
To replace the ever-outward flow of cash,
But to keep my statement black I’d held depreciation back,
And my banker said that I’d done something rash.
He quivered, and his teeth began to gnash.

When I asked him for a loan, he responded, with a groan,
That the interest rate would be just prime plus eight,
And to guarantee my purity he’d insist on some security—
All my assets plus the scalp upon my pate.
Only this, a standard rate.

Though my bottom line is black, I am flat upon my back,
My cash flows out and customers pay slow.
The growth of my receivables is almost unbelievable:
The result is certain—unremitting woe!
And I hear the banker utter an ominous low mutter,
“Watch cash flow.”
Herbert S. Bailey, Jr.

Come on, admit it. It’s kinda cute.

 

Globalization – An Illustration

A new semester means another opportunity to rant about textbook prices – but we’ve been over this before, so I won’t waster our readership’s time. Instead, a tale of global business, intrigue, and, hopefully, happiness.

Some background. That great engine of entrepeneurial opportunism, E-Bay, also operates as another company called Half.com. Half.com specializes in selling used textbooks to poor, desperate students like me at prices that  typically undercut our local "college bookstore" by about 30%. Hey, every dollar counts.

I found out about Half.com from a buddy earlier this year; I ordered a book and the seller turned out to be his ex-girlfriend who had just taken the class. The price was right, the service impeccable, she sold the book for more than our "local bookstore" was willing to pay for it, and I saved about $25. As Steven Covey would say, it was a win-win.

Naturally I upped the ante for this semester. I decided to order as many books as I could; in the end, the grand total was 3 books. Patting myself on the back for being thrifty and ingenious, I moved on the next items of the preschool checklist.

School started today and only one of the books is on my bookshelf. It came from Jacksonville, FL. This morning, my mailman dropped off a card telling me that an items is ready to be picked up at the post office, and, by the way, the postage due is $7.00. That order has come from Banning, CA. Still no sign of the third book, although I do have some email correspondence with the "vendor".

The missing book is "Understanding Financial Statement", published in 2009, in the USA.  I sent an email to the "vendor" on August 24, and got this reply:

Hello Agricola,

Hope you must be doing good. As per our order book, the order for the book ‘ Understanding Financial Statements’ was placed by you on August 18,2009. I am glad to tell you that the book was shipped on August 21,2009 using the "DHL" shipment service. You may track the book’s status by putting in the tracking number ‘1329118663’ in the required field of the link ‘http://dhl.com‘.

Sorry for the inconvenience. Hope to serve you in a more efficient manner in the future.

Thank You,
(name hidden)

 

Alarm bells immediately rang. First, broken English. Second, DHL. Aren’t they that Dutch company that ships everything via Air in all of the countries of the world except the US? WTF?

So here is the tracking info:

Tracking history…   Help 
Date and time Status Location Service Area
8/25/2009      1:23 am Transit through DHL facility   Cincinnati Hub, OH
8/24/2009    10:37 pm Depart Facility   East Midlands, United Kingdom
                    10:36 pm In transit.   East Midlands, United Kingdom
                      5:33 am Scheduled to move   East Midlands, United Kingdom
8/23/2009      5:46 pm Depart Facility   London-heathrow, United Kingdom
                      9:05 am Processed at DHL Location.   London-heathrow, United Kingdom
                      8:45 am Transit through DHL facility   London-heathrow, United Kingdom
                    12:44 am Depart Facility   Delhi (new Delhi), India
8/22/2009    11:12 pm Processed at DHL Location.   Delhi (new Delhi), India
                      1:08 pm Transit through DHL facility   Delhi (new Delhi), India
                      3:23 am Depart Facility   Mumbai (bombay), India
                      3:18 am Processed at DHL Location.   Mumbai (bombay), India
                      1:48 am Departing origin.   Mumbai (bombay), India
8/21/2009    11:38 pm Shipment picked up   Mumbai (bombay), India

 

Yes, you read the report correctly. My $65 textbook (used) is coming to American from Bombay, India. Somehow, this entrepeneur will sell a book, published in the US in 2009, ship it back to the US, paying the air freight charges, and make a profit. Is this a great world or what?

I just hope it is written in English…

TaxMan

The first day of classes for the fall semester. A heavy load of business oriented classes, mostly as a requirement for my minor. The most daunting is Taxation, an upper level accounting course. The professor is a seasoned veteran of the public accounting wars who returned to the (relative) safety of academe to earn her PhD. in Accounting. Tax, she proudly proclaims, is her baby. To set the tone, she provides in the syllabus her most favorite quote:

People think taxation is a terribly mundane subject. But what makes it fascinating is that taxation, in reality, is life. If you know the position a person takes on taxes, you can tell their whole other philosophy. The tax code, once you get to know it, embodies all of the essence of life: greed, politics, power, goodness, charity. Everything is in there. That is why it is so hard to get a simplified tax code. Life just isn’t simple. – Sheldon Cohen, former IRS Commissioner

I open the book and see 29 chapters, 13 appendices, tables on inside front and back covers, a glossary that’s about 15 pages, all written in a font that requires my most powerful reading glasses.

She also points out that accountants learn, on the one hand, to maximize wealth in order to impress bankers, while simultaneously minimizing income to deter the IRS…

This ought to be good.