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Money Bag

Unit 3 - Finance & accounts - QB

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Chart Increasing

Unit 1 - Introduction To Business Management - QB

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Briefcase

Unit 2 - Human Resource Management - QB

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Direct Hit

Unit 4 - Marketing - QB

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Factory

Unit 5 - Operations management - QB

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Bar-Chart

Unit 6 - Assessment

<ul>
	<li>
	Cash = Money that businesses obtain through:

	<ul>
		<li>Selling their products/services 🍎👕</li>
		<li>Borrowing from banks 🏦</li>
		<li>Getting investments from shareholders 💼</li>
	</ul>
	</li>
	<li>
	Key point🔑: Cash is SUPER liquid (like water) and is kept in the &quot;current assets&quot; part of the balance sheet. Think of it as the lifeblood of a business. Too little, and the business could collapse. 💔🏢
	</li>
</ul>

<ul>
	<li>
	Cash Flow = The money dance!💃 Money flowing in and out of a business over time.

	<ul>
		<li>Cash inflows💸: Money coming IN (like from sales).</li>
		<li>Cash outflows💸: Money going OUT (like paying for costs).</li>
	</ul>
	</li>
	<li>
	Key point🔑: Positive cash flow (more inflow than outflow) means businesses can cover their daily costs and keep the lights on!💡
	</li>
</ul>

<ul>
	<li>
	Profit = Total revenue (sales) - Total costs💡.

	<ul>
		<li>Positive difference = Profit! 💲💲</li>
		<li>Negative difference = Loss. 😢</li>
	</ul>
	</li>
	<li>
	Key point🔑: Profit tells you if your business is financially successful. A big green thumbs up!👍💚
	</li>
</ul>

<ul>
	<li>
	Key point🔑: They&#39;re DIFFERENT!
	</li>
	<li>
	Customers can buy using

	Both ways, it counts as sales revenue. BUT, if sales are mostly credit, the cash flow at that time might not match the profit.

	<ul>
		<li>Cash 💵</li>
		<li>Credit 📝 (like a delayed payment)</li>
	</ul>
	</li>
	<li>
	Real-world example🌎

	Here, even if they made a profit of $6,000, they only have $1,000 in hand for the month!

	<ul>
		<li>Business A sells goods worth $10,000 and spends $4,000.</li>
		<li>They give customers 1 month&#39;s credit for 50% of sales.</li>
		<li>Profit = $10,000 - $4,000 = $6,000 💲</li>
		<li>Cash Flow = 50% of $10,000 (which is $5,000) - $4,000 = $1,000 💵</li>
	</ul>
	</li>
</ul>

<ul>
	<li>
	Scenario A - Profitable but No Cash (Bad Situation😱)

	<ul>
		<li>Why? Possible reasons

		<ul>
			<li>Too lenient on credit for customers - waiting ages to get paid!⌛</li>
			<li>Paying suppliers way too early.💸</li>
			<li>Buying a LOT of machinery or assets at once.</li>
			<li>Overtrading: buying loads of stock and tying up all your cash.</li>
			<li>Paying off loans.🏦</li>
		</ul>
		</li>
	</ul>
	</li>
	<li>
	Scenario B - Cash Flow Positive but Unprofitable (Mixed Situation🤔)

	<ul>
		<li>Why? Possible reasons

		<ul>
			<li>Taking loans from banks.🏦</li>
			<li>Selling company assets.🏢</li>
			<li>Getting more investment from shareholders.💼</li>
		</ul>
		</li>
	</ul>
	</li>
</ul>

Next Chapter Sneak Peek: Insolvency - when profitable businesses run out of cash!🔍

&nbsp;

Remember, cash and profit are like Batman and Robin - different, but both essential to the business world! 🦸🚀🌍

&nbsp;

Happy Studying! 📚

Profit Vs. Cash Flow: Key Differences Explained!

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Higher Level

Business Management HL

Unit 3 - Finance & accounts - QB

Profit Vs. Cash Flow: Key Differences Explained!

Table of content

What is cash? 💵

What is cash flow? 🔄

What about profit? 📊

Unlock the Full Content!

Unit 3 - Finance & accounts - QB

Profit Vs. Cash Flow: Key Differences Explained!

Table of content

What is cash? 💵

What is cash flow? 🔄

What about profit? 📊

Unlock the Full Content!