Profit vs Cash
A company can earn a profit on paper and still be short of cash.
The idea
Profit is what is left after a company subtracts its costs from its sales on paper. Cash flow is the real money moving in and out of its bank account. The two can be very different, because a company can make a sale today and not get paid for 30 or 60 days. That is why a business can look profitable and still run short of cash to pay its bills, and why investors usually look at both numbers. 💵
Words to know
- Profit
- Sales minus costs, worked out on paper.
- Cash flow
- The real money going in and out of the bank account.
- Revenue
- All the money brought in from selling things, before costs.
- Expense
- Money a company spends to keep the business running.
- Invoice
- A bill you send a customer asking them to pay you later.
Try it — no account needed
Cash flow just means money moving in or out of the bank account.
Sort each event into Cash in or Cash out.
0 / 6 sorted
In the full lesson
- 1Sort into groups
- 2Put it in order
- 3Make the call
Vine has 107 lessons like this one, each written three ways so a 7-year-old and a 17-year-old both get a version that fits.
Practice with real prices
Real market data, pretend money. Learn how investing actually works without risking a cent.
Start free