Rich, I must admit that this is quite confusing "being in the black" on a cash flow basis, means to me having positive cash flow, but not in the black on an operational basis? Typically during start up, you go in the black on an operational basis first, then on a cash flow basis. The reason is very simple, as you increase your sales level, you must increase your working capital (you have more inventories and more accounts receivable), typically for each dollar of additional sales you need at least $.30 of additional working capital. You can be operating "profitably" but still leaking cash, this until the accumulated profits have equaled about 30% of your then current sales rate.
It is apparent that either follow up questions to clarify this were not there, or that the questioning people have little concept of the differene between cash flow and pofits and thus did not see the need to point out the unusual situation in which you are not profitable but "in the black" on a cash flow basis. Unless, of course, management meant in the black to mean they have additional sources of financing the negative cash flow (then the answer should have been "in a positive cash position").
Zeev |
