Fuzzy Numbers

BusinessWeek has a cover article on how companies post profits, and some of the games they play with the numbers -- generally resulting in total confusion when investors and analysts try to determine if earnings indicate a healthy company or one with underlying problems. The biggest problem comes from accounting rules that give companies the ability to estimate their earnings -- the estimates were supposed to help companies more accurately reflect their true value -- but that's not always the case. By estimating, companies try to properly allocate income in specific periods during which they were earned. Similarly, expenses are allocated to specific periods, and not necessarily when the money was spent. Making sense of the numbers can be near impossible -- and not only for those external to the companies -- internally, companies income, balance sheet and cash flow reports can all tell a different story. What's a company really worth -- even its assets, can be legally manipulated. Remember Enron? Check out the article.