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I understand if you spent more than you make which is a unprofitable, but if you were unprofitable how did you get more cash? I'd like to tell the IRS that, 'yeah, I sold a lot of stuff, got more cash in my account but I was actually unprofitable.' What am I missing?
Opps sry for the typo in the title
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I'll try to do this as simply as I can
Revenue - Expenses = Profit
Revenue = money collected for goods sold
Profit = earnings minus cost of goods sold (before taxes and other expenses)
If a company increases production, it does so against finite resources. This will after a certain level degrade profits. So in BBRY's case, if the increase in production of the Z10 and Q10 resulted in a high enough increase in costs for labor, materials, etc. it would result in a loss (negative profits) irrespective of sales and revenue.
Totally get what you're saying so where does the cash come from?
I have a million dollars i spent 500k for production, advertising etc and earned 400k so a lost of 100k but that means my cash position is 900k. How can I have more cash?
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I have had the same question as the OP for a while. But I still don't understand. 1st of all Profit/loss the BlackBerry reported was NET profit/loss. Meaning revenue - cost of good sold - all other expenses.
So in Blackberry's case they made 3.1 billion this quarter and their cost of goods sold must have been approximately 3.2 billion therefore resulting in a loss of 89million.
In the same period they say that they have increased their cash pile by around 600 or 700 million (don't remember the exact figure). Where is this excess cash coming from is my real question. If it's coming from the revenue and this is what they are left with after all their expenses shouldn't this be their net profit. And if its not coming from their revenue then where is this coming from?
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Your way makes sense but it is ultra simple: Starting balance - Expenses + Revenue = Ending Balance. Your accounting assumes you have no inventory or anything else necessary for production. It also assume the 1 million you have is your total resources.
That is miles away from where BBRY is.
They also increased payable and decreased receivables. This is where a significant chunk of the cash increase came from.
Cash flow measures actual cash in hand.
Have a quick study of their cash flow statement.
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Also a significant increase in the Asset "Short Term Investments" compared to the previous year.
I would imagine they spent cash on that short term investment. Which would show as a cash outflow on the cashflow statement
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Thats the point. In accounting, not every item that's defined as a "cost" represents actual movement of cash.
Let's take depreciation as a good example. You have a machine in your assets that's worth $1,000,000. At the end of the quarter you'll have to depreciate $100,000 of that machine, which will lead to $100,000 in costs on your P&L account, although not a single cent has left your pocket.
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Depreciation is not and has never been considered a "cost" for the purpose of the Balance Sheet or P&L. It is an Expense.
Sorry for my wrong vocabulary, I'm german.
The point is, depreciation surely is part of the cash statement (which is the P&L account), or not?
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Yes depreciation appears on both the BS & P&L but you have to understand that depreciation is a "noncash expense"
He appears to know that from his original post.
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Things like cap ex are expensed over many years. That's why people like me ignore Earnings and instead rely on fcf.
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It's more simple than all of this. BB received about $500 m in tax credits.
And they've also reduced headcount and stopped paying some people. :-)
Yeah, didn't I say exactly that? :-)
("not every 'cost' ('expense') leads to actual movement of cash"....depreciation of 100,000 on a machine will account for 100,000 in 'costs' ('expenses'), without a single dollar leaving your pocket (=noncash)).
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