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A supplier is trying to determine if credit should be extended to two customers whose circumstances have changed. 99U per Case Records.

The acquirer wants the acquired company to be accounted for as a pooling of interests.

A supplier questions the credit extended to two customers during a weak sales period.

A company meets financial analysis year-end earnings per share estimates, which have been progressively lowered during the year.

Operating cash flow (OCF) is an increasingly popular measure of a company's performance, but a study of nearly 300 businesses raises doubt about its reliability as a financial indicator. The study matches 60 companies that had filed for bankruptcy between 1971 and 1982 with 230 nonbankrupt companies chosen randomly from the Compustat Industrial Tape. The study found that OCF figures (OCF, OCF/current liabilities, and OCF/total liabilities) over five years before filing for bankruptcy were poor predictors of failure.

Westinghouse had just issued its annual report to shareholders for the year ending December 31, 1973. The report indicates that sales have increased to a record $5.7 billion but that net income is down almost 20% from its record level of $199 million in the previous year. The chairman's letter to shareholders suggests that while earnings were not very good in 1973, he expects them to recover in 1974. May be used as either the 1st or 2nd case in a 2nd-year MBA course dealing with the analysis of corporate financial reports. The objective is to introduce students to the concept of "quality of earnings." Much of the focus of the case deals with the flexibility management has in making accounting decisions which determine net income.