Just like you never want to hear a doctor say "oops" in the operating room, you never want to see a going-concern statement in a financial report about a company you own. Accountants throw these in when they've been over the books, talked to customers, and checked the horoscopes and have concluded there is "substantial doubt" about a company's ability to remain in business. In short, don't blame the accountants if the company files for bankruptcy protection.

You¿d reckon that a going-concern statement would be enough to send investors running to the exits, but it's not. True, many large institutions automatically bail when an existing company gets slapped with one of these, but many individuals (often wrongly) take a chance they know more than the bean counters.

During the tech boom of the late 1990s, many companies actually went public even though they had been hit with going-concern statements. Many of those companies subsequently disappeared. Enough said.

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Thursday, July 03, 2008

Report: Southwest Airlines and the FAA too Close for Comfort

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Southwest Airlines and the Federal Aviation Administration may be playing together a little too nicely, according to a report issued by the U.S. Department of Transportation, which was reported in The Washington Post.

Oversight by the FAA may have led to safety lapses, the report shows.

The DOT report alleges that FAA inspectors allowed Southwest (LUV) to fly 46 Boeing 737s that should have been inspected for fuselage cracks, according to the newspaper.

This report comes after the DOT-launched probe into the FAA’s regulatory oversight of the airline industry, which was likely prompted by the “overly collaborative relationship” between the administration and Southwest Airlines.