What I said above was a comedic exaggeration, though it has a bit of truth. Even start up companies that are literally trying to loan their way into large expansion watch their cash flow closely.

I'm also aware of how many companies play games to make cash flow and/or their books look better. From cutting deals they know will fail so they can book the income now, to delaying payments so they have more cash on hand this quarter even if it provokes penalties the next. Companies wouldn't play those games if cash wasn't important.

The same thing goes for my comment about loans. Only a small portion of corporate loans are really bad. Most are perfectly sensible short loans to cover payroll until the cash comes in or to finance real expansion. And there is another substantial chunk that are stuff that a company could do without loans but if the loan is cheap enough, why not do it now rather then wait to save up the money? Accounting departments are perfectly capable of judging that the $10,000 cost of the loan will be more then offset by the extra $15,000 in revenue.

The problem is that the bad loans and the insurance on those bad loans may be a small percent of the market in terms of number of loans. But in terms of cash value, they are significant, possibly even a majority.

Jay