Compare Net Cash Flow to Net Profit?

Question

This is a question in my review but I cant seem to locate it anywhere....so could someone explain this to me please! Thanks!

Answer 1

This is related to cash vs accrual basis of accounting and is best explained by an e.g.

Question
In its first year of operations, Best Co. earned $39,000 in revenues and received $33,000 cash from these customers (i.e. $6,000 was on credit). The company incurred expenses of $22,500 but had not paid $2,250 of them at year-end. Best Co. also prepaid $3,750 cash for expenses that would be incurred the next year. Calculate the first year’s net cash flow, and net profit under the accrual basis of accounting.

Answer
Under the cash basis you care only for what's received and paid :
Received $33,000 from customers
less -
Paid $20,250 expenses
Paid $3,750 meant for next year

Net cash flow is $9,000

Under the accrual basis:
Revenue earned $39,000
less -
Expenses $22,500

Net profit is $16,500

Under the accrual basis, you have to take into account everything earned or incurred, whether received or not, whether paid or not. The prepayment of $3,750 doesn't figure in this year's net profit since it's meant for next year. This is what's meant by the matching concept. You have to match the expense to the revenue but you also have to match revenues and expenses to the correct period.

Answer 2

Net Cash flow, it's net money left on an account
And Net profit, it's Revenue mines expenses, minus taxes = Net Revenue. You can have good cash flow this month from A/R. But if sales same month was low, your net profit will be low.I hope it's help you.

Answer 3

Basically net cash flow is all the money you take in (income), less everything you paid out (expenses).
Net profit is the total of your sales and any other residual income (interest etc.), minus Expenses recorded in the period, depreciation, and taxes. Net profit does not include money paid out for capital purchases, purchases of inventory, or other balance sheet type activity.

Answer 4

he sold the company for billions