The Accrual vs. Cash Translator
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Help me reconcile the difference between this company's reported profit and its actual cash. Profit (accrual basis): [AMOUNT] What I know about the period: [CHANGES IN RECEIVABLES, PAYABLES, INVENTORY, DEPRECIATION, ANY LARGE NON-CASH ITEMS] Explain, step by step: 1. Why accrual profit and cash flow diverge in general 2. How each item above pushes cash above or below reported profit 3. A rough bridge from net income to operating cash flow using what I gave you 4. Which of these gaps is normal and which would make me question earnings quality Teach me the logic as you go so I can do this myself next time.
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