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Cash Flow vs. Profit - What is the Difference? | Cash Flow Tips from CPA
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- Опубликовано: 16 авг 2024
- Cash flow is NOT the same thing as profit.
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Cash flow is NOT the same thing as profit. Getting this wrong can be the reason your business fails.
Because over 90% of businesses fail because they run out of cash, not profit.
Cash flow is simply the flow of CASH, aka MONEY, paper, bread, cheddar, and so on - in and out of your business.
A positive cash flow means that your company is adding more cash to your account than its losing.
A negative cash flow means that your company is burning more cash from your account than its adding.
Profit is the financial gain or loss between the amount of money you EARNED and the amount of expenses INCURRED.
These two words, earned and incurred, is the biggest difference between cash flow and profit.
Outline:
What is Cash Flow?: (1:18)
Difference between Cash Flow and Profit?: (2:05)
How is Cash Flow Calculated: (3:42)
What is a Cash Flow Statement: (4:20)
How to Look at P&L to Understand Cash?: (5:20)
Tips to Improve Cash Flow : (6:50)
Recap: (7:40)
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“Cash flow tells the story of how a person handles money.” - Robert Kiyosaki
Thank you for describing the distinction between Net Income and Cash Flow!
Very good explanation. Was always confused with the cash flow vs net income.This video really clarifies it.
I still dont get the different ... could you explain with other words?
Same here man
perfect video, thank you... im following a stock, Redwire, and its narrowing losses but posted a huge free cash flow win... so i was confused, but now i understand, they probably took out a loan to grow faster
If I’m following this correctly, it seems the main difference is including the “saved” cash you have in addition to your incoming and outgoing cash for a given period. The alternative is disregarding the accumulated cash and just focusing on the incoming and outgoing cash for a given period.
Thank you for this overview. It's helpful to me as a new investor learning how to analyze businesses' financial statements.
Nice vid, the amount of people I meet who don't quite understand the difference is scary. Even some business people too.
clear as mud.
Best explanation I've come across 🏆
Thank You My Brother. I am an entrepreneur from NYC. I am grateful for the information your sharing. Please keep up the great work and I will push my friends to your channel to strengthen a major weakness-financial literacy.
Thank you! Will do!
One of the best explanations you could hear
great break down in your explanation. it really helped me understand.
I like your content and the simplicity of it but very educational. Keep up the great work.
Wow this is the best explanation ever thank you
Thank you from Copenhagen, really well explained!
The idea that one would include money that they never collected in their “earned” revenue for P/L is utterly asinine. Why would anyone do this?
Really loving this channel and how much knowledge y’all share, thank you!
Thank you! We're just getting started. :-)
cheers pal, helped a lot in my studies
We are so glad to know that!!
Thank you sir.. keep up the amazing Content!
Thanks for your feedback! Glad you liked it :)
This is such a great channel m,just what I needed! subscribed 👍🏾
Welcome aboard!
Outstanding Content! Thank you.
Thank you brother !
Thank you for the great work
A good explanation finally!
thanks .. it helped much
Excellent. Keep it up.
💯💯💯
Incredible!
Thanks!
Still have no idea
Great video this is a gem. Since I was a kid My mom gave me the cash flow mentality main reason I dropped out of school on a football scholarship lol they technically was paying for my education but wasn’t no cash going in my pocket 😂😂 look good sounded good though
Great story! thank you
Oh wow, i never knew about the cash flow report. Should i print and file with my other end of month reports in quickbooks?
Yes, you should always keep an eye on your cash flow. :-)
Thank you for this info. How does one reach you?
At 6:04 mark - does Cash Basis Financial Statement account for your cash or does it not account for your cash? In the audio, you said IT DOES, but in the definition, it said it DOES NOT.
Thanks
I noticed that too. I’m guessing the printed part is a typo
once you learn how to precisely triangle all deficit variables to stimulate influx AND tangible data while streamlining capital, you're in the game. until then you're playing with dave and busters coins.
Am I wrong to assume that this means that cash flow could change month over month?
It changes with Every Transaction. That is why an Operating Cash Flow (OCF) is considered as an important KPI to monitor the fluctuating cash flow. the formula is Current Cash Available / Current Liabilities.
OCF =1 means you have enough cash to cover all liabilities.
Negative means cash crunch. Positive is better.
Best is 3
Cash vs accural
Can somebody answer this please: Why doesn’t the interest go in the operating cost. I thought it did☹️
Because it is Cost of Money (Capital). It is paid for the Finances Raised. Operating cost is Expenses for Running Operations. If you stop the operations tomorrow they will stop (e.g. salaries, or electricity bills) but not your bank loan's interest :)
If I do cash basis accounting as opposed to accrual accounting, would my profit be the same as my cash flow?
Kinda, but not necessarily, you could still buy inventory that would be expensed as you sold it
skip to 1:26
still don't get it. mathematically they still seem the same to me.
Did you watch the full video? I tried my best. 😅
He’s saying one tracks what you owe and what others owe you when the money has not actually been paid out or collected. So someone might owe you money that you haven’t collected yet. But you’d note that as earnings. The other is what you’ve actually been paid or paid out. So you received payment and have “actualized” that earning. From a general perspective those two scenarios are the same. But from an accounting perspective, the video is making the point that they different things.
@@LYFEAccounting I did, not your fault I'm just having trouble wrapping my head around it for some reason.
Rich dad poor dad
Mhmm