I am afraid Rich is right Gordon. I have not travelled North of the border for over three years and our national press hardly covers any Northern news, apart from the endless political situation.
Be assured that if I do get any 'local' knowledge I will pass it on to this board.
Back to the subject of cash flow and profit. It is certainly possible to be 'in the black' cash flow wise and still be incurring losses, particularly in a situation where start-up capital equipment and raw materials have been paid for prior to getting revenue from sales. The following figures are totally fictional, and are definitely not intended to represent anything that is going on in Valence;
Example:
Capital equipment purchased for $900,000 (and already paid for)
Depreciation on equipment is 40% p.a.
Raw Material stocks are $500,000 at 1/1/99 and $400,000 at 31/3/99
Raw materials purchased during the quarter $200,000
Operating Expenses for quarter $150,000
Additional equipment purchased and paid for during quarter $100,000
Assumes creditors and debtors remain the same at beginning and end of period
Cash Flow:
Sales $500,000
Raw materials - new purchases ($200,000)
Operating expenses ($150,000)
New equipment ($50,000)
Therefore cash surplus for quarter = $100,000
Profit and Loss for the same period:
Sales $500,000
Purchases ($300,000) - being $500k + $200k - #400k
Operating expenses ($150,000)
Depreciation ($100,000) - being 40% x ($900k + #100k) for 3 months
Therefore loss for quarter ($50,000)
I know that this example is too simplistic. My only point is to show that it is possible to be 'in the black' for cash flow before being 'in the black' for profit.
Barry |
