The ABC of a Corporate Collapse - Chapter 2 Cash Flow Statement

David Koch presents the ABC of a Corporate Collapse for CPA Australia, a step-by-step guide through the financial and business decisions that lead to the spectacular collapse of ABC Learning. Chapter two looks at ABC Learning's cash flow statement and how it relates to business performance.

Category:

Education

Tags:

• CPA Australia
• David Koch
• ABC Learning
• business
• accounting
• principles
• failure
• collapse
• lessons
• administration
• insolvent

[CPAaustralia]

Cash flow from operating activities for the 1st six months of 2008 financial year was $19.8 mil. Net Profit for the same period was $37.1 mil. Such a dramatic fall in cash from operating activities & a significant decline in Net profit over a 6 month period was a clear signal to investors & interested parties there was a problem. With the knowledge of this dramatic change the composition of the cash flow from operating, financing & investing activities from prior years required further review.

[wilsonnkwan]

@CPAaustralia I agree. There was slow reaction from the investors even before the report for the early half of financial year 2008 (July 07 to Dec 07), there was slow decline of share price. The report was released after 25th Feb 2008 which lead to the sharp share price drop in the next month. This suggest that the market is not fully inefficient and most investors did dump their shares (except for some who bought more like Temasek Holdings)

[wilsonnkwan]

Please check your accounts again, the 37.1 net profit that year with the OCF of (20M) cash flow is after the 2007 full year because the Year end of ABC is on the 30 June.

the 37.1 net profit relates to the period of half year from 1st july 2007 to 31st Dec 2007 which means it is the 2008 first half year