Cash Flow vs. Net Income

Difference Between Cash Flow and Net Income

Cash flow and the net income are the two different terms related to availability of money. While cash flow refers to cash in and out of business all the time, profit is what remains always at the end of an exercise with the business owner. While it is the profit in which a business owner is more interested in while it is the cash flow that is the lifeline of any business as it ensures the availability of money required for daily operations as well as investments to be made to create capital. Let us see the difference between cash flow and net income.

Cash flow and net income are two parameters that can indicate the financial health of a company. These two can be clearly seen in the financial statements of the company.

Cash flow

For those who prepare the accounts of a company, cash flow refers to the amount of money that is received and spent in a particular period. You can not consider credit sales as cash flow because it is the money that you have collected and have available to spend on business.

Net income

Net income is on the other hand the profit or loss made after subtracting all expenditures and fees from profits. Net income is usually at the bottom of a financial statement and easy to find.

The difference between cash flow and net income

The difference between cash flow and net income is visible when the sales did not bring money and are added to the sales column. This projects the net income more than it is in reality. The money is not available as cash flow and thus cannot be used.  To summarize, cash flow is the total money in and out of the business while, income is cash flow minus all costs.

 

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