Cash Flow and Profit - Essay Example

CASH FLOW AND PROFIT and Introduction Everyone gets into business to make profits. Further, it is in every business person’s mind to have his or her business continue running for the longest time possible. To do this, there has to be a proper play between cash flow and profits. This brings me to discussing the difference between the two and their importance in business.Cash flow may be defined as that money that comes in or gets out of a company to fund or finance its projects (Business Fillings Incorporated 2012).

On the other hand, profit is that amount of money that remains after deducting the expenses from all the company’s income or revenue. In most cases, cash flow is much important for small scale business than profits. Because of cash flow, a business may run properly. It is that money that is essential in running and managing a business without it, a firm may be sent out of business.Additionally, cash flow is that money that a firm needs to continue paying its bills at the end of each month (Rosemary, 2015).

Also, it is necessary to have cash flow as opposed to profits. Without cash flow, you may make profits but that would not be good for a company with long term goals. Profits may be good for a company, but cash flow is something that is a must for every business as it puts the company in a position to stand on its own even in times that are hard. A good example of a company that had much cash flow was Amazon (Stever Robbins Inc 2015). Despite making losses for some time, the cash flow available made it possible for the company to run for long enough to start realizing profits.

Despite the differences between cash flow and profits, these two items are important to any business. Cash flow ensures that a business can stand on its own and profits put a business in a better position to expand its services.ReferencesBusiness Fillings Incorporated 2012, The Difference between Cash Flow And Profit, Available at http://www.bizfilings.com/toolkit/sbg/finance/cash-flow/cash-flow-and-profit.aspx on 2nd May 2015. Rosemary, P 2015, What Is Cash Flow, Available at http://bizfinance.about.com/od/cashflowanalysis/g/Cash_Flow.

htmStever Robbins Inc. 2015, Cash Flow Explained, available at http://www.steverrobbins.com/articles/profit-and-cash-flow-explained/