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Profit vs. Cash Flow

ok I know
Cash flow is the inflow minus outflow
Profit is Revenue minus Costs

But according to the business book both are different and the Profit and loss acount has elements from profit that are not found from cashflow...

So now I am confused XD Basically can any one give me a basic deffinition of both and any breif differences, better to be save than sorry I guess -_-
Reply 1
Avatar for KizD
KizD
12
I don't really understand what you're asking, not sure if this will help, but if you read a few of these might clear the confusion up...

http://www.google.co.uk/search?hl=en&client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&q=define%3Aprofit&btnG=Search&meta=

http://www.google.co.uk/search?hl=en&client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&q=define%3Acash+flow&btnG=Search&meta=
Reply 2
Avatar for Aplin
Aplin
OP
2
thanks Kiz, I know the individual deffinitions already though pretty much. :smile:
cash flow relates to how much hard cash the business actually has. so its a good measure of liquidity.

profit on the other hand can be made, through credit sales, so cash might not be actually coming into the business that month/week. The P&L may look healthy, but the cash flow may be another story, if the business is continually struggling to pay its current liabilities.

P&L shows all the revenue coming in, and expenses going out, but doesnt take account of when all this happens. Its more of a historical document than a day to day budget Like a cashflow.

Knowing cashflow is important for AS, and P&Ls and balance sheets for A2. (on AQA anyway.)
Reply 4
Avatar for Aplin
Aplin
OP
2
shes_ellectric - thats EXACTLY what I wanted to know, thanks so much ^^

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