Difference Between Cash Flow and Net Income

Cash flow and net income are often confusing words as far as businessmen are concerned. Net income or profit, is the money that remains with a company after deducting all the expenses. Cash flow means the money that flows in and out of a company for its various activities.

When looking at the financial statement of a company, cash flow statements, net income statements and balance sheet statements are considered to be very important.

Cash flow is the total money that a company gets, whereas net income is cash flow minus the expenses, such as the cost of undertaking the business, interest, depreciation, taxes, salaries and other expenses.When comparing the two, cash flow is a bit hard to manipulate under the GAAP.

The cash flow statement is a company’s checkbook, which reconciles the net income statement and the balance sheet statement. The cash flow statement records all the in-flow and out-flow. the cash flow statement is data that shows the source of money and where it has been spent. In cash flow statements, net income is stated in the beginning. In the net income statement, the actual income, whether loss or gain, for a specific period is mentioned.

Cash flow is generally looked upon for determining a company’s value, problems regarding top liquidity and for evaluating the income attained by accrual accounting. It also determines the risk involved with a company.

The net income shows how profitable the company has been during a period. Net income is also used to calculate the share amount.

Summary

1. Net income or profit is the money that remains with a company after deducting all the expenses. Cash flow is the money that flows in and out of a company for its various activities.

2. When comparing the two, cash flow is a bit hard to manipulate under the GAAP.

3. Cash flow is generally looked upon for determining a company’s value, problems regarding top liquidity and for evaluating the income attained by accrual accounting. It also determines the risk involved with a company.

4. The net income shows how profitable the company has been during a period. Net income is also used to calculate the share amount.

5. The cash flow statement is data that shows the source of money and where it has been spent. In the net income statement, the actual income – whether loss or gain – for a specific period, is mentioned.

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