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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (64501)	9/13/2003 9:15:06 AM
From: RetiredNow	Respond to of 77397

Lizzie, that's ridiculous. Your first statement that depreciation is just an estimate is a good one. I believe that there are many cases where depreciation is overestimated and in others where it is underestimated, but everyone agrees it is a cost of doing business because depreciable assets lose their value over time as they get worn out. So depreciation is estimated and it is expensed. But to say that because it is an estimate, we should not expense it, is really moving towards the realm of fantasy. If that's the case, why do we bother with financial statements at all? I'll answer my own question. We need financial statements and estimates of the cost of doing business recorded therein, precisely because the owners of the public and private companies want to know how their cash is being used. The more accurate those financial statements are the better they can assess whether their cash investments are being squandered, and if so, remove their investment and reinvest it somewhere else. If owners (shareholders) determine that companies are ignoring real costs of doing business and not recording those costs in their financial statements, then they will take their investment elsewhere. If it turns into a stampeded, then the company from which they are running will find that any form of financing from equity to debt will dry up. Then that company sure as heck better have good cash flows. Otherwise, they will be out of business pretty soon with no working capital. Those are the hard facts, like them or not.