The Bottom Line

The disturbing economic news of the day has few silver linings. Everyone seems to be hurting, what with gas prices at $4 per gallon and rising food, tuition and other costs at all time highs, depressed housing markets and foreclosures all over the news and (gasp!) even some hedge fund managers and CEO's of certain major companies seeing their often obscene bonuses reduced to merely profane. In addition, there are all the chain store closings and layoffs. Of course, the rebate checks are coming!!!

Since, as most of you know, TNB has spent his pre-literary career in the business world, primarily as an auditor, he feels the compelling need to explain many of the complex, technical and arcane terms regarding business and the economy that might be confusing. Auditors are taught to exercise healthy skepticism in their dealings with clients and others. It's not a stretch for some of you to perceive that the slightly sarcastic attitude of this blog is a result of such "healthy "skepticism having a few medical issues. So, in the spirit of such cynicism (healthy or otherwise) following are several important terms you need to understand:

• We're Going In A Different Direction This isn't, as you might expect, heading to the North Pole when the South Pole was your destination. This generally means "you're fired" (very indirect for say Donald Trump) or we've chosen another supplier, product, location or whatever. Why be direct when a euphemism makes you feel better?
• We've Met Our Targeted Expectations When results are poor, companies often claim that despite regrouping, retrenchment, political upheaval in some obscure foreign country or perhaps global warming, they at least achieved the (extremely modest) amounts that had been predicted. Of course, these excuses can't last too long before the executives of the company in question are asked to go in a different direction.
• We Haven't Seen The Lawsuit Yet When particularly embarrassing litigation or worse yet criminal action has been brought against a company it's always better to delay comments until the "spin doctors" (see post of April 28) can get their act together. Then they'll probably state "we believe this action to be without merit and intend to fight it vigorously", which means that we'll stall indefinitely and hope for a reasonable settlement or for the legal fees to ruin the other side.
• We Are Focused On The Bottom Line This sometimes means simply that a company hopes that its net income (reported on the bottom line of its operating statement) will be well above "targeted expectations" (see above) or conversely its net loss (same bottom line) won't be too unexplainable, even by a spin doctor. Or it may mean that the company's entire criterion for success is such bottom line, even at the risk of say polluting the environment or producing inferior or harmful products. Watch the bottom line, measure it accurately (that's the auditor talking) but don't be obsessed by it.