Cash = Revenue? - Relation of Cash and Earnings.
Cash = Revenue? Today’s topic was one of my very first lessons that I learned. Cash ≠ Revenue . What I mean by it is the net income amount that we see in the income statement, that we believe what the company has earned in that year is not the same as the cash company has received in that year. It may be less or more. And without cash the numbers on the Income statement is as fake as the Gucci sneakers or Rolex watches, which probably one of your friend flexes. The high earnings reported on TV or anywhere are to be researched and backed by cash. Hence it becomes necessary to see the relationship between the Income Statement and the Cash Flow Statement. Last time if you remember, I talked about sources of earnings by bifurcating the ROE = Net Profit Margin x Asset Turnover x Financial Leverage .Please read the previous blog, Quality Matters - Dupont Analysis , for context .Now we will talk about relation of those earnings with re...