U3, AOS 2 - Cash vs. Profit Flashcards
What is the primary difference between cash and profit in business performance measurement?
Cash refers to the actual money available, while profit is the revenue minus expenses, representing earnings over a period.
True or False: Profit can exist without cash flow.
True
Fill in the blank: __________ is a measure of a company’s ability to meet its short-term obligations.
Liquidity
What does profitability indicate about a business?
Profitability indicates a business’s ability to generate income relative to expenses over a period.
Which financial statement typically reflects cash flow?
Cash Flow Statement
True or False: A company can be profitable but still face liquidity issues.
True
Multiple Choice: Which of the following is a key indicator of liquidity? A) Net Profit Margin B) Current Ratio C) Return on Equity
B) Current Ratio
What is the formula for calculating profit?
Profit = Revenue - Expenses
Fill in the blank: __________ measures how well a company uses its assets to generate profit.
Profitability
What is cash flow?
Cash flow is the net amount of cash being transferred into and out of a business.
True or False: Operating cash flow is a component of total cash flow.
True
Which ratio is used to assess a company’s profitability?
Net Profit Margin
Multiple Choice: Which financial metric would be more useful for assessing immediate financial health? A) Profit B) Cash
B) Cash
What does a negative cash flow indicate?
A negative cash flow indicates that a company is spending more cash than it is receiving.
Fill in the blank: __________ is crucial for long-term business sustainability and growth.
Profitability
True or False: Cash flow can be positive while profitability is negative.
True
What is the primary purpose of a cash flow statement?
To provide a detailed analysis of what happened to a business’s cash during a specified period.
Multiple Choice: Which of the following factors does NOT impact cash flow? A) Sales Revenue B) Inventory Management C) Employee Satisfaction
C) Employee Satisfaction
What is working capital?
Working capital is the difference between current assets and current liabilities, indicating liquidity.
True or False: Profitability is a short-term measure of business performance.
False
