Here is a brief overview of the differences between cash flow and profit.
- Cash flow is a measure of money coming in against money going out. Profit is a measure of income against expenses.
- Cash flow has a direct impact on the amount of cash in the bank. Profit is a book entry and not money in the bank.
- Cash flow is all about timing. Profit demonstrates how effectively the business is being managed.
- Cash flow matches cash coming in against cash going out. Profit matches income against expenses.
- Â Cash flow includes items that are not related to income and expenses such as buying assets and repayment of loans. Profit includes non cash items such as depreciation and unpaid expenses.