Profit is not a fiction, it's just a different thing that cash flow.
Cash flows ultimately reconcile with profit. Or they should.
Cash flows ultimately reconcile with profit. Or they should.
Like Amazon was known for years to intentionally not make a profit. They arranged their business so that all the money they made got plowed back into the business in such a way that they could claim a slight loss.
That was in their control to some degree.
No, absolutely not. There are well accepted accounting principles.
If a company wants to re-invest, then they can do that - but 'profit' is a material, objective thing, of course it changes profit, but it also would change 'cash flow'.
Financial accounting is a real thing, not any kind of fiction.
It gets to be fiction when there are things that are difficult to account for, or intangible things like goodwill.
But if they book a sale on Dec 1 - then that's revenue, even if the money doesn't come in until 3 months later.
I really wish goodwill was called "acquisition premium" and everyone would get it.
Technically yes, but really no.
Most other assets have an objective value.
When companies buy others, they are buying brand, talent, future revenues, often at crazy massive premiums. That's where the inherent intangibility comes in.
There's just no way for investors to really nail down why a given acquisition might be had for this or that much.
Companies are bought for often nebulous reasons, so these writedowns often skew the earnings in weird ways.
So it's the inherent intangibility in that price ... that drives the ambiguity of a lot of goodwill.
But I get what you are saying, technically it's not rocket science.
While you're technically correct that there are well-accepted principles, they don't always have much bearing on whether a company will be solvent, or easy to finance.
Example 1: Amazon's core retail business. Not very "profitable". Yet, it provides a massive amount of float through their ability to get inventory quickly from suppliers on long payment terms (30-60 days), that's sold to customers in something like 7-14 days with immediate collection. That means Amazon has something like 2-6 weeks cash, at hundreds of billions/revenue per year (8-40 billion in interest-free cash), as effectively an interest-free loan. That might not be profitable but it's very easy to see how that allows cheap financing of capital-intensive investment. Amazon is explicitly run with emphasis on cashflow dynamics (less on profit). It's worked exceedingly well for them.
Example 2: A hotel might run very profitably on a unit basis but require so much upfront capital to finance that it's practically impossible to build.
My point isn't that accounting isn't "real". Money is also in some sense a "shared fiction" [1] and yet it's quite real. It's just that looking merely at accounting profit/loss doesn't really tell you much about the operational dynamics of a company. It took me a really long time to understand this.
[1] From "Sapiens", a great book, explaining the role of fiction in real-world decision-making and beliefs.
I think most people get this, this isn't really one of those magic things.
In both cases you've described 'profit' is still 'profit' in the generally accepted sense, and we have cash flow statements to help us understand that.
? It's right on their public statements.
The components of it are not known, but then again, same thing applies to their cash flow.