2. What about cash flow?
"But hang on", I hear you say, "I've been on a Finance for Non-Financial Managers course, surely cashflow is far more important?"
Of course cashflow is important. Every course on the subject I've ever seen talks about cashflow being the main cause of company failure and warns of the dire consequences of overtrading, but what they don't always make clear is that, in the long term, profit equals cash.
That's right, despite all the attempts of accountants to cloud the issue with accruals, prepayments, provisions, depreciation, revaluations and the like, in the long term (and long may be over the life of a company) the amount of profit that a company makes will be the same as the cash that it generates.
If you don't believe me I'll prove it to you by taking you through all the stages of a single transaction (and all a company is, is a large number of transactions.
But first, I'll have to explain a little about accounting terminology and, horror of horrors, double entry bookkeeping.
"Making things as easy as"
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