DB #3: Examining Differences between Cash Flow and Earnings: If you have experienced a ride on the tube (the subway system) in London you were probably surprised by the kind reminder when the train arrives at the station. As the train stops you are reminded to “Mind the Gap,” the gap being the distance between the train and the station platform. A gentle reminder issued by polite voice than warns you to be careful and watch your step when leaving the train.

A recent article in CFO Magazine issues a similar warning to the GapPreview the document between earnings and cash flows. The article warns of a potential disconnect between earnings and cash flow that is important when analyzing a company’s performance.

After reading the article, answer the following questions:

The article points out that it may be important to compare top-line and bottom-line growth. What is the difference between top and bottom-line growth?
What factors could lead to a difference in top- and bottom-line growth?
Do companies have some flexibility in recognizing gains from sales of assets? Give an example of how that could affect growth.
How could outsourcing impact growth in cash flow? Give an example of how outsourcing affected growth in cash flow.

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