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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 71.08

+0.1%

Nov 7 9:30 AM EST

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To: trouthead who wrote (21057)	1/22/1999 6:44:00 PM
From: Chuzzlewit	Read Replies (1) of 77397

Junior, just read the section on liquidity (it's in words), and look closely at the section on cash flow from operations (it's numbers, but pretty self explanatory). One thing you should be aware of is the fact that the depreciation schedule (that is the rate at which you can write-off the cost of long-lived assets) that companies use is generally different than the one allowed by the IRS. Also, companies take certain "liberties" with recording revenues allowable by GAAP accounting that the IRS does not recognize, so you will find differences in the taxes used to compute "earnings" vs. the taxes actually paid. So one of the benefits of using a cash flow statement is you can see the cash actually paid by a business, and from that figure out (more or less) what taxable "earnings" are. You should also understand that businesses try to pay as little in tax as permissable by the tax code (nothing wrong with that), so recorded "earnings" for tax purposes tend to be much more conservatively stated than earnings for investors. TTFN, CTC

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