accounting
Is there a difference between cash flow and profit?
Cash flow and profit aren’t the same but are some of the important financial business metrics.
Cash flow is the balance of cash moving into and out of your business at a specific point in time. It can be positive which signifies more money is moving into the business instead of out of it. On the flip side, a negative cash flow signifies more money is moving out of the business.
Profit is the balance after you take total income minus all operating expenses. Just like cash flow, profit can be both positive and negative.
So, what is the difference? Profit is the amount of money left after expenses have been paid and cash flow indicates the net flow of cash moving in and out of the business.
Is one more important than the other? Both are important and have their purpose to help owners understand their business. You need to understand both and how they work with each other to best evaluate your business.
