Many solar companies aren't remotely as profitable as their accounting numbers let on.

I've been thinking this dangerous little thought for a while now. Cash flow concerns have cropped up in my writing on Yingli Green Energy's (NYSE:YGE) year-ago IPO, stunted China Sunergy (NASDAQ:CSUN), and capital-craving ReneSola (NYSE:SOL), but I haven't really addressed what is a sectorwide issue.

Some trusted investor friends of mine have publicly tackled this matter in recent weeks, pointing to not only the chasm between various firms' net income and operating cash flow, but also things like the fragility of Solarfun Power's (NASDAQ:SOLF) framework agreements and SunPower's (NASDAQ:SPWR) exposure to third-party financing.

To help me visualize the cash strain in the space, I put together a spreadsheet of every solar company's key financials, alongside capital expenditures. Companies reporting positive net income and negative cash flow get red-flagged. Companies with expenditures far in excess of cash flows get flagged as well. There's a lot of red on my screen.

These companies are highly dependent on the continued ability to raise outside capital. This is an increasingly risky proposition given the current strain on the world's financial institutions, combined with potentially rising risk aversion among investors as we border on bear market territory.

The idea that solar investors should have serious cash flow concerns finally went mainstream today with a research note by Goldman Sachs (NYSE:GS). Here, an analyst singled out Trina Solar (NYSE:TSL) for "weak working capital management," but the same could be said for many competitors.

I urge Fools to give their solar stocks a good hard look. The upside is easy enough to envision, but also think about what would happen if the capital markets closed up shop for a while. Would your company be able to meet its take-or-pay agreements with suppliers? Could it pay the contractors executing its multi- or centi-million dollar expansion? In some cases, I believe the answer will be "no."

Related Foolishness: