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Why Profit Doesn't Translate Into Cash
Author(s) -
Tomas Lee Reginald
Publication year - 2016
Publication title -
journal of corporate accounting and finance
Language(s) - English
Resource type - Journals
eISSN - 1097-0053
pISSN - 1044-8136
DOI - 10.1002/jcaf.22141
Subject(s) - cash flow , cash flow statement , cash , operating cash flow , profit (economics) , cash flow forecasting , business , cash management , economics , finance , microeconomics
In this article, the author suggests there is a disconnect between profit and cash flow. Ultimately, you will need to build models to help you understand and manage cash flow. Central to this insight will be capacity modeling. Capacity is the largest expenditure of most companies, yet most fail to realize and manage capacity. Most accounting approaches fail to accomplish this. Additionally, understanding the difference between cash outlay cost (cost c ) and noncash cost (cost nc ) will be important, as only one is cash, and you cannot add dissimilar numbers together mathematically. © 2016 Wiley Periodicals, Inc.