LESSON 33: Plenty of profitable businesses have been wi Articles

LESSON 33: Plenty of profitable businesses have been wiped out because they assumed cash and profit are the same thing. Don’t make that mistake

 Cash viability is the acid test of your business life. It is what will make you or break you. It is literally the currency of business and of your personal life too. All business transactions ultimately have a cash impact. All profits ultimately convert into cash, and all losses ultimately soak up cash. Being able […]

33.1 Understanding the difference between Profit and Cash

 What profit or loss are you making? What does that tell you; how important is it? It is essential that you understand what profit means, why it has come to be regarded as the almost universal measure of business success, what it really tells you, and the limitations of it. The fact is that profit […]

33.2 We’re making profit, but where’s all the money?

 Let’s now look closely at this difference between profit and cash with a detailed example. This is important. What we are about to do may well be an eye-opener for you. Many a business owner or manager has faced the conundrum “We’re making profits – but where’s all the money?”. We have described the reasons […]

33.3 Revealing the difference between the cash you planned for and the cash you actually have

 The illustration above demonstrated how a funds statement explains the change in cash between one period and the next. But as well as being applied to two historical periods (year ends) this technique can just as well be applied to a Balance Sheet and its corresponding planned or budgeted Balance Sheet at the same date. […]