The Difference Between Cash Flow and Profit
Big cash flow ≠ Big profits for your business. The difference between cash flow and profit is an important concept to grasp, let's take a closer look. Cash Flow VS Profit One of the biggest misconceptions out there is that large cash flow means big profits for a business. That isn't always the case -- in fact, you could have a business with a lot of cash flow that is on the verge of shutting down. Cash flow simply tracks how much money you have coming in and going out. Profit on the other hand tracks what you have left over after you take the income and then subtract all expenses. It sounds very similar to the idea of tracking cash flow , but timing is what makes the difference here. Let's take a look at three different scenarios to get a better idea of how these two accounting concepts differ. Company A - The Ideal Cash Flow and Profit Example Everything is goes perfectly for company A. They have plenty of clients and expenses are well under control. Each ...