Why Profit Doesn’t Always Mean Cash
Imagine this situation.
A furniture company completes a large project worth $50,000.
The customer agrees to pay after 90 days.
The company records the sale as revenue.
Its financial statements now show a profit.
But the money hasn’t actually arrived.
Meanwhile, the business still needs to pay employees, suppliers, transportation costs, and rent this month.
Without enough available cash, everyday operations become difficult—even though the company appears profitable.
Quick Example
| Business A | Business B |
|---|---|
| Profit: $100,000 | Profit: $80,000 |
| Cash Available: $5,000 | Cash Available: $60,000 |
Which business is better prepared to handle unexpected expenses?
In many situations, Business B has greater financial flexibility because it has more available cash.
[…] July 29, 2026 […]
This is one for the archives. Learned so much.
This is a keeper for my bookmarks bar. Bookmarked.
This is going to influence my work for months. Bookmarked.