Reversing the Slide: A Strategic Guide to Turnarounds and Corporate Renewal

Chapter 4. Cash Not GAAP

Cineplex Odeon's founder was famous for many things: inventing the multitheater concept, creating the paper popcorn container, and using a holiday weekend to barbwire the entrances of his competitor's headquarters building. He also legitimately used a change in accounting assumptions to turn an operating loss of $45 million into a reported $40 million in profit, even though the company was bleeding cash.

You may have heard catchphrases like "cash is king" and nodded intuitively while wondering exactly what that means. In a turnaround situation, it means that cash flow is the only measure of financial performance that matters. It seems simple, but to the average chief financial officer, who has spent his life training to ...