Cash Flow Forensics: Operating Cash Flow vs Accounting Net Profit
Profit is an accounting opinion; cash is an audited fact. Forensic cash flow analysis reveals whether reported earnings represent real money.
The CFO-to-PAT Divergence Test
CFO / PAT > 1.0 indicates high-quality earnings.
CFO / PAT < 0.7 indicates profits locked in unpaid receivables or unsold inventory.
✓ Forensic Investor Checklist Before Trading
01.
Calculate CFO / PAT across 3 consecutive fiscal years.
02.
Verify trade receivables growth does not outpace revenue growth.
Conclusion
Forensic cash flow auditing cuts through accounting wizardry. Always follow the cash.