The excerpt that follows is from a recent article on the financial reporting of Amazon.com, the famous Internet seller.

From the beginning, Bezos [Amazon.com’s Chairman and CEO] told shareholders that his goal was to build a company, not an artificial bottom line.

“When forced to choose between optimizing the appearance of our GAAP accounting and maximizing the present value of future cash flows, we’ll take the cash flows.” . . . Amazon has since become famous for emphasizing its so-called pro-forma results, which exclude certain costs and highlight Bezo’s beloved cash flow. Cash flow—is indeed a critical indicator of whether Amazon will avoid being crushed by its debt. But ultimately Bezos will have to show that Amazon can make honest-to-God net profits under old-school accounting.13 Divide into class groups in order to develop a position in support of or against Bezo’s reasoning. Then participate in a debate, defending your group’s position. The basic question to address is, Which is more important for a young growing company—cash flows from operating activities or net income under GAAP?

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