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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: sylvester80 who wrote (92265)7/8/2002 12:42:16 AM
From: KyrosL   of 99280
 
What Reliant did can hardly be classified as fraud. Inflating revenues and costs by the same amount, has no effect on profits and cash flow, and is not the same as what Worldcom did. Worldcom inflated profits and cash flow by $3.4 billion.

The energy trading companies reported inflated revenues and corresponding costs, not inflated profits and cash flow. A wash trade involves an equal amount of cash on both sides of the ledger. In fact, wash sales actually hurt energy companies in the eyes of those that can read financial statements. That's because increased revenues from wash sales resulted in no increased profits or cash flow, which is what counts for knowledgeable investors. Knowledgeable investors look at margins, and wash sales are not good for margins.

Kyros
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