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Why is cash flow different from profit for an entrepreneur?

Answer and explanation

Correct answer: Profit may show accounting earnings while cash flow shows actual availability of money

Profit is generally calculated as revenue minus expenses according to accounting rules, while cash flow tracks money actually entering and leaving the business. A sale made on credit may increase recorded profit but provide no immediate cash for payments. Therefore a profitable business can still face cash shortages; the two measures are related but not identical.

Related tags

Cash-FlowProfitIntroduction To EntrepreneurshipEntrepreneurial Skills IArtificial IntelligenceClass 9 Mcq

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