Profit is an accounting concept — it measures income minus expenses over a period, including non-cash items like depreciation and accruals. Cash flow measures the actual movement of money in and out of a business. A company can be profitable but cash-poor if, for example, it has high debtor days, holds large amounts of stock, or has made significant capital investments. Conversely, a business can generate strong cash flow while reporting a loss. Understanding both metrics is essential for managing a business well. Many business failures occur not because the underlying business is unprofitable, but because the owner ran out of cash before the profit materialised.
