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If you earn $10,000 in revenue but have $5,000 in expenses, you have $5,000 in profit.
A common misconception is that profit and cash flow are the same. You can be highly profitable on paper but still go bankrupt because your cash is tied up. Cash Flow
If you also have a $2,000 loan payment, $1,500 in sales tax, and a $3,000 owner's draw, your "profitable" business actually has -$1,500 in cash flow. Where the Money Goes (The 3 Buckets) Accountants divide cash movement into three distinct areas: If you earn $10,000 in revenue but have
Money from daily business—selling goods or paying for office coffee. If you earn $10
Most businesses struggle to get paid quickly, but Walmart has mastered a "negative cash conversion cycle".