<HTML>In a message dated 1/30/2003 2:09:58 PM Eastern Standard Time, dhenwood@panix.com writes: <BLOCKQUOTE TYPE=CITE style="BORDER-LEFT: #0000ff 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px">What are the actual effects of such writedowns? They're mostly writing down goodwill, which is all hot air anyway. They may have to renegotiate loan covenants that require certain levels of assets, but what cash flow impact is there, if any? </BLOCKQUOTE> True - the impact isn't on cash flow, but on revenue. In a simplified and transparent world, we would be able to determine a company's 'value' based on cash-in vs. cash-out. But, since we're dealing with revenues in, liabilities out - the corporate balance sheet can be altered in many non-cash ways throwing debt ratios and all credit based contracts out of whack. Because 'Goodwill and other intangibles' feeds into assets then into revenue figures, subtracting it creates a sudden imbalance in the ratio between revenues (assets) and debt (or other liabilities). Also, though companies may be able to renegotiate loans based on revised revenue / debt ratios, they can't negotiate long term debt, say in the form of corporate bonds. That's why they sell themselves off in bits to raise money instead of renegotiating all debt, after that it's default, then bankruptcy. Goodwill reduction, even before it leads to balance sheet revision, hits the stock value, weakening any security collateralized by stock. Nomi</HTML>