Cash Flow Study Casts Doubt on U.S. Corporate Profits

A new study, by the Financial Analysis Lab at the Georgia Institute of Technology's DuPree College of Management, finds a troubling gap between cash flow from operations and operating income last year for the 87 nonfinancial members of the S&P 100.

The study finds that the difference between operating cash flow and income last year for the median company in the group was almost 12% greater than average for the three years that ended in 2002. Such a wide gap reflects a heavy dependence on improvements in working capital and other boosts to cash flow that aren't sustainable, simply because such gains aren't generated by the growth of a company's underlying business operations.