PROFIT IS A MATTER OF OPINION, CASHFLOW IS A MATTER OF FACT

View this post on Instagram

Do you know that a company can be profitable today and still go bankrupt tomorrow if they run out of cash? _ Why is this important? So you are looking at the right place when analysing the viability of a business. Accounting works based on principles and assumptions, this allows for some subjectivity in the way some entries are captured. As such, it is possible for businesses to legally make accounting choices that would help them 'manage' their earning i.e. make it look good (or bad sometimes). Some unscrupulous managers can go all out to manipulate their earnings with fictitious accounting entries. However, cash is what it is. A company wither has it at hand or in the bank or it doesn't have it. So when analyzing a company don't just look at the profit, focus on the cashflow.

A post shared by Thrive – Personal Finance (@thrivefinancial_) on

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: