What is the difference between cash flow and profit?
An example of an AI chatbot conversation about cash flow vs profit.
What is the difference between cash flow and profit?
Cash flow refers to the total amount of money being transferred in and out of a business, while profit is the revenue remaining after all expenses are deducted.
Can you give me an example of each?
Sure! For cash flow, if a company receives $10,000 from sales but pays $7,000 in expenses, its cash flow is $3,000. For profit, if the same company has $10,000 in sales and $8,000 in expenses, its profit is $2,000.
Why is cash flow important for a business?
Cash flow is crucial because it ensures that a business can meet its obligations, such as paying employees and suppliers, even if it is not currently profitable.
How can a business improve its cash flow?
A business can improve cash flow by speeding up receivables, managing inventory efficiently, and negotiating better payment terms with suppliers.
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