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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

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