Nathan Liao, CMA on LinkedIn: Revenue vs. Profit vs. Cash Demystifying Key Differences 👇 I often… | 22 comments (2024)

Simple and comprehensive explanation

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Revenue Vs Profit Vs Cash

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If your answer to “what is revenue, profit and cash?” is just simply “money!” Then, here are the differences explained to you by Nathan Liao!

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🚨Revenue vs. Profit vs. CashDemystifying Key Differences 👇I often encounter a common misconception:Conflating revenue, profit, and cashLet's demystify these terms w/ practical examples🔵 1. Revenue (Top Line):The total amount earned from selling goods or providing services, before any costs are deducted.Example: Imagine selling a designer bag for $500. That $500 is your revenue, irrespective of how much you spent to acquire or produce the bag.🔵 2. Profit:The leftover amount after all business expenses are deducted from the revenue. It's often referred to as the 'bottom line'.Subcategories:1. Gross Profit:Revenue minus cost of goods sold (COGS).2. Net Profit:What remains after all operating expenses, taxes, interest, etc., are deducted from the gross profit.Example: From the $500 bag sale, let's assume it cost you $300 to make the bag. Your gross profit is $200. After other expenses like rent, salaries, and marketing, let's say you're left with $50. That's your net profit.🔵 3. Cash:The actual amount of liquid money a company has on hand, which can come from operations, investments, or financing. Cash flow, a critical metric, tracks the inflow and outflow of this money.Example: From the $500 bag sale, after paying all the bills, you might end up with an increase of $40 in your bank account. This could be due to delayed payments, prepayments, or any other cash movement not directly tied to immediate revenue or profit.—---------------💡 In Summary:- Revenue is your top line- Profit indicates operational efficiency- Cash is the oxygen that sustains your company👉 What would you add? Comment below!—---------------Hi! I’m Nathan Liao, Founder & CEO of:🚀 CMA Exam Academy dot com- Pass the CMA exam on your first attempt!- 16-week Accelerator program (link in bio)- Students in 120 countries. 92% exam pass rate🚀 CPE Flow dot com- Are you a certified accountant?- Earn your annual CPE credits (link in bio)➕ Follow me for accounting & finance insights

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🚨 Top 4 Financial StatementsUnderstanding Their Interrelation 👇Financial statements are quite intricateOne can easily get lost in the detailsHowever, they harmoniously work togetherNarrating a company's financial story:🔗 1. The Balance Sheet (Statement of Financial Position):The static snapshot. It showcases assets, liabilities, and shareholders' equity at a specific moment in time. It's the foundation, setting the stage for everything else.🔗 2. The Income Statement (Profit and Loss Statement):It records revenues, expenses, and profits or losses over a defined period. Importantly, the net income from the income statement affects retained earnings on the balance sheet.🔗 3. The Cash Flow Statement:It traces the flow of cash from operating, investing, and financing activities. Notably, the net cash from operations links directly to changes in the balance sheet’s cash and cash equivalents.🔗 4. The Statement of Changes in Equity:It details shifts in owner’s equity throughout the year, primarily influenced by net income (from the income statement) and any dividends or new capital introduced.—---------------So, how do they relate?Let’s imagine a business cycle in 5 steps:1️⃣ We start with our resources (Balance Sheet)2️⃣ Through the course of business, we generate profits or sustain losses (Income Statement)3️⃣ These profits or losses influence our equity (reflected back on the Balance Sheet)4️⃣ The actual cash generated or used in this process is monitored (Cash Flow Statement)5️⃣ Lastly, changes in the equity section, influenced by profits and distributions, are detailed (Statement of Changes in Equity)—---------------👉 Want to know more?Supercharge your career with the CMA credential!🌟 82,000+ accountants got my free CMA exam cheat sheet. Get yours too! (link in bio)—---------------Hi! I’m Nathan Liao, Founder & CEO of:🚀 CMA Exam Academy dot com- Pass the CMA exam on your first attempt!- 16-week Accelerator program (link in bio)- Students in 120 countries. 92% exam pass rate🚀 CPE Flow dot com- Are you a certified accountant?- Earn your annual CPE credits (link in bio)➕ Follow me for accounting & finance insights

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Exploring financial statements with Nathan Liao! Let’s break down the top 4 and see how they fit together. Vital for anyone in accounting and finance! 📊 #FinancialWisdom

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Simple illustration showing the interrelation between the most common financial statements.

🌟 Paper-3 Cost & Management Accounting 🌟📚 Unleashing the Triumph of Self-Practice 🚀As the Nov 2022 Exams Loomed, I Found Myself Sailing Through The Sea of Subjects. Yet, Amidst The Academic Tempest, There Was One Island I Had Neglected - Costing, Paper-3.But, As They Say, "It's Never Too Late." After Conquering The Syllabus, I Started With Just My Module And Past Year Materials As Companions. This Subject, Often Labeled A Beast, Turned Out To Be My Secret, Helping Me Conquer Group-1 With A Dazzling 67 Marks! 🌟Here's The Revelation: Self-Practice, Coupled With A Deep Understanding of The Concepts, Is The Ultimate Weapon. 🌟 Key Takeaways for Costing Glory 🌟1️⃣ Presentation is King: When you sit down for the exam, clarity in presentation is your knight in shining armor.2️⃣ Embrace Every Detail: Don't leave any topic in your modules. Every concept, every equation - Embrace it all.3️⃣ Step by Step to Success: Remember, step marking is your ally. March on confidently until you reach the limits of your knowledge.And now, the star-studded topics to focus on:1️⃣ Cost Sheet: 10 Marks2️⃣ ABC Costing: 10 Marks 3️⃣ Employee Costing: 5-10 Marks 4️⃣ The Theoretical Question: 10 Marks of Theory, Make It Your Stronghold. Easy To Gain Marks.5️⃣ Process Costing: 10 Marks.Remember, In The Realm of Costing, Self-Practice Reigns Supreme. 🌠 So, March Forth, Embrace The Numbers, And Let Your Efforts Script A Tale of Triumph In The World of Costing! 📊💪#cost #costing #intermediate #cainter #costaccounting #caintermediate #nov2023 #tips #success

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sometime get little confused with ebitda and ebit formula and this would definitely help you alot.

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Great breakdown of depreciation and amortization, Nathan Liao! Understanding these concepts is crucial for sound financial management.One additional point to highlight is that while both depreciation and amortization reflect the allocation of an asset's cost, they serve different purposes. Depreciation helps account for wear and tear on physical assets, while amortization is vital for recognizing the value of intangible assets over time.These distinctions are not only essential for accurate financial reporting but also play a significant role in taxation, as they impact a company's taxable income. Additionally, for businesses looking to make strategic decisions involving asset acquisitions, knowing how to apply these methods can be a game-changer.Thanks for shedding light on this important topic!

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