Business tax returns may be a superior source of a business’s true net income or loss and cash flows.

FACT:  Owners of businesses don’t tend to overstate the income on a tax return they send to the Government and have to pay tax on.

With the recent advent of the “Enron age” and the accompanying Wall Street debacles due to improperly prepared audited financial statements, financial statements can no longer be relied upon to always be the “most accurate” source of a business’ financial performance.  The broad guidelines of the FASB in “interpreting” what income or expense is has contributed to this ongoing problem.  This is especially true when considering the use of “Internally Prepared” business financial statements which are especially questionable.

Spreading business tax returns, year-to-year, side-by-side may be the most accurate presentation of a business’s true net income or loss and cash flow.