This preview shows page 1. Sign up to view the full content.
Unformatted text preview: In accrual accounting, cash flows do differ from income and expenses. For example, cash flows from investing and financing activities will affect cash outflows but are not income and expenses counted in calculating profit. Most cash flows from operating activities also result in income or expenses, but in different time periods. Many cash flows from investing and financing activities never result in income or expenses e.g. cash increases from borrowings. In terms of profitability, profit is more important in the long run if profits are not made, the business will fail. However, liquidity can also cause major problems and cash flow is also important. A business can have positive cash flows while trading at a loss in the short term, but in the long term, profits and positive cash flows are both important....
View Full Document
- Spring '11
- Income Statement