Business Literacy Institute Financial Intelligence

YouTube
LinkedIn
Facebook
  • Financial Concepts
  • What We Offer
    • Products & Services
    • Live Training
    • Online Financial Training
    • Financial Intelligence Books & Comics
      • Book Excerpts
      • Comic Excerpts
    • Training Topics
      • Income Statement
      • Balance Sheet
      • Cash Flow Statement
      • Cash versus Profit
      • Financial Ratios
      • Return on Investment (ROI)
      • Advanced Topics
    • Financial Intelligence Test
    • Project Management for Profit Training
    • Webinars
    • Money Maps
    • Keynotes
  • Harvard
  • Blog
  • About
    • BLI Team
    • Articles
    • Our Clients
    • Testimonials
    • Interviews
    • Contact
You are here: Home » What We Offer » Training Topics » Cash versus Profit

Cash versus Profit Training

Cash Flow Statement TrainingIncome Statement, Profit & Loss, P&L StatementCash and profit are not the same. A company can be profitable and still run out of cash. And if it runs out of cash it may have to close its doors. This is a paradox that stumps a lot of people, including the entrepreneurs and company owners that it actually happens to.

There are three essential reasons why profit is not the same as cash:

  • Revenue is booked at sale – revenue is recognized at the time of sale not when the bill is paid. We subtract our expenses from the revenue to determine profit but that is often no more than a promise. Customers have not yet paid for their product or service. The cash doesn’t show up for another 30-60 days depending on the terms and on if the customer actually pays you.
  • Expenses are matched to revenue – Expenses such as annual payments are matched up to the revenue, such as paying for a year’s rent in advance. Most expenses are paid for later, when the vendors’ bills come due. The expenses on the income statement don’t reflect the cash going in and out during a specific time period.
  • Capital expenditures don’t count against profit – capital expenditures don’t appear on the income statement when they occur, only the amount being depreciated is charged against revenue. Cash on the other hand goes out right away.

You may be thinking that in the long run cash flow will pretty much track net profit. Accounts receivable will be collected, accounts payable will be paid, and capital expenditures will be depreciated over time so eventually everything will match up. This is true to a degree but the difference between profit and cash can create all sorts of mischief in the meantime.

Financial statements training classes go through two sample companies and show the difference between cash and profit. Get a clearer picture of where your company stands with cash flow and profit and understand the difference.

Contact us to set up a live training class or sign up for our online financial statements training.

Sign up for Online Financial Training

Enroll in the Training Now!

Looking for training on the income statement, balance sheet, and statement of cash flows? At some point managers need to understand the statements and how you affect the numbers. Learn more about financial ratios and how they help you understand financial statements.

Our online training provides access to the premier financial statements training taught by Joe Knight. Learn finance in a fun and clear way that's easy and painless.

Find out more

Business Finance Training

Learn the basics of the financial statements and the story your numbers tell. BLI offers:

Live Training

Ask questions and participate in discussions as our trainers teach you how to read and understand your financial statements and financial position.

Online Training

Learn at your own pace and go through the financial statements and ratios. Take the quizzes to see how you learned.

Log in to your online training account

We wrote the book on Finance!

Financial Intelligence Books

Financial Intelligence takes you through all the financial statements and financial jargon giving you the confidence to understand what it all means and why it matters.

Do you understand finance? Take our test

Are you smarter than the average manager? Take our nationally validated test to see how much you really know. See how you compare to your boss and co-workers.

Contact BLI

E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Call: (818) 591-5955

Copyright © 2023 Business Literacy Institute · Log in to your online training account