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Which is better Cash or Profits?

Cash and Profits are both critical for the success of a business.

Cash flow is inflow and outflow of money in and out of a business. It is essential to ensure the daily payments, purchases, salaries etc.

Positive cash flow indicates the company is able to liquidate its assets and pay off the regular operational expenses. The company has cash at its disposal. Negative Cash flow indicates a shortfall in meeting the obligations. Which means a company may have to borrow to meet its operational expenses.

Companies can ease their cash flow situation by injecting cash, say by the promoter or borrowings etc. However, there is a cost for all such external cash infusions. Either in terms of Equity or Debt.

Profits are the surplus left over after all the expenses are deducted from the revenues. It indicates if a company is doing the right things to ensure if it can generate profits. Every company exists to make profits. Without profits, there is no point in running any business.

However, a profitable company could have cash flow challenges with money stuck in inventories or receivables.

Bottom line is that both Cash and Profits are important for any business. And both of them go together. A healthy business is one which has good profits with healthy positive cash flows.

Would you like to learn how you can have a healthy business using CashOS?

Reach out to us at info@CashOS.com

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