Can anybody explain it to me what cashflow means?
August 28, 2010 by Cash Flow Tips
Filed under More Cash Flow Answers
Can you answer Hengky W’s question about Cash Flow?:
Can you explain to me in simple words what cashflow mean? What is the difference between cashflow and profit? I know profit is revenue – expenses, what about cashflow? Thanks
Thanks Jonathan C, another question though. If the Net cashflow is a loss, does that mean my business is losing money? Or does it mean that I have too many stocks (e.g. too many cups, lemons) than the lemonades that I sell? Thanks
Balance Sheet Cash
Can you explain to me in simple words what cashflow mean? What is the difference between cashflow and profit? I know profit is revenue – expenses, what about cashflow? Thanks
Thanks Jonathan C, another question though. If the Net cashflow is a loss, does that mean my business is losing money? Or does it mean that I have too many stocks (e.g. too many cups, lemons) than the lemonades that I sell? Thanks
Balance Sheet Cash
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Cash Flow Feedback: means money coming to you and more and more money
Cash Flow Feedback: Cashflow is any source of money coming in, or income. Profit does NOT mean revenue. Revenue is the same as cashflow. Profit is money you have leftover after all bills, expenses, and taxes are paid.
Cash Flow Feedback: cashflow is the money coming in and the money going out
Cash Flow Feedback: Cash Flow, in it’s simplest form represents transactions of a business that affect the CASH account.
For example, if you were to have a business. Say making lemonade, you would buy lemons, sugar, water, and cups. You would then sell your lemonade for whatever price you decide.
Assuming you know a bit about basic accounting, you as a business person would then record this on your Journal to track your money and how it is being spent.
You would write down your expenses ( the things you bought to make lemonade) and how much you made in sales. This is your Cash Flow. Now if you are talking about “Net” Cash Flow, you would have to subtract revenue from expenses. Just like in your profit formula. However the main difference between “Net” Cash Flow and Profit is that Profit means that you “made” money not lost it. While Net Cash Flow can either show a loss of money or a gain or (profit)
I hope this helps, and that is is simple enough.
—IN RESPONSE TO YOUR LAST QUESTION—
Unlike your average Profit and Loss Statement, a Cash Flow statement can tell you more. An analysis of your Cash Flows can show how you are spending your money. If there is a loss in your inflows (money coming in) V.S. Outflows, it could mean that you invested money in say another lemonade stand. While you might still have to report a loss for the year, it does mean your business is growing. It is also a good way to analyze your current assets and perhaps you are buying too much of something and not selling enough.
Cash Flow Feedback: cash flow refers to amount of cash being received and spent by a business
profit is making a gain in your business or to make progress