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Below you will find a graph of Enrons operating cash flow versus its net income in the years leading up to the companys downfall. You
Below you will find a graph of Enrons operating cash flow versus its net income in the years leading up to the companys downfall. You will notice that Enrons income differs quite a bit from its operating cash flows for every year in the chart. What could account for the differences? Some users of financial statements use differences between net income and cash flow (particularly operating cash flows) as a rough indicator of how reliable net income is. What is your opinion of the reliability of Enrons income based on the chart below?
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