Mind the Gap. A new study of operating cash flow and earnings for the 87 nonfinancial companies in the Standard and Poor's 100 suggests that the recent upturn in corporate profits may not be sustainable.

Is the recent upturn in U.S. corporate profits likely to last? Unfortunately, a new study comparing trends in cash flow with those in earnings for the largest blue-chip companies provides ample reason for doubt.

The study, by the Financial Analysis Lab at the Georgia Institute of Technology's DuPree College of Management, found a troubling gap between cash flow from operations and operating income last year for the 87 nonfinancial members of the S&P 100. DuPree found that the difference between operating cash flow and income last year for the median company in the group was almost 12 percent greater than average for the three years that ended in 2002.

Posted by: Ron S.