ABSTRACT
Most textbooks in corporate finance, investments and financial statement analysis devote little attention to computing or using cash flow from operations. The W. T. Grant Company was the nation's largest retailer when it filed for protection of the Court under Chapter XI of the National Bankruptcy Act on October 2, 1975. In an efficient market, stock prices continually reflect all publicly available information about a company's past performance and future prospects. The evidence presented here, however, seems to suggest that the W. T. Grant Company was a counter example to market efficiency. The financial press frequently refers to 'cash flow', defined as net income plus depreciation. This measure of cash flow approximates working capital provided by operations, which may prove a very poor surrogate for the cash flow actually generated by operations. While Grant's net income was relatively steady through the 1973 period, operations were a net user, rather than provider, of cash in all but two years.
