Markets · 6 pages · 12 min
Profit times earnings by accounting rules, while cash flow times the money that actually enters and leaves the firm.
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Profit under accrual accounting recognizes revenue when it is earned and matches expenses to that earning, even if the cash moves in a different period. A firm can therefore report a profit while its bank balance falls, or report a loss while cash arrives from collections and financing. The opening covers accrual times the earning, cash times the bank, and receivables delay collection.
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