What is the name of the financial statement that summarizes a firms revenue and expenses over a period of time?

Cash flow and profit are essential financial metrics in business. Yet, it isn’t uncommon for those new to finance and accounting to occasionally confuse the two terms. Cash flow and profit aren't the same things, and it’s critical to understand the difference between them to make key decisions regarding a business’s performance and financial health.

For investors, understanding the difference between profit and cash flow makes it easier to know whether a profitable company is a good, long-term investment based on its ability to remain solvent in times of economic crisis. For entrepreneurs and business owners, understanding the relationship between the terms can inform important business decisions, including the best way to pursue growth.

Here’s everything you need to know about cash flow, profit, and the difference between the two concepts.

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What is Cash Flow?

Cash flow refers to the net balance of cash moving into and out of a business at a specific point in time.

Cash is constantly moving into and out of a business. For example, when a retailer purchases inventory, money flows out of the business toward its suppliers. When that same retailer sells something from its inventory, cash flows into the business from its customers. Paying workers or utility bills represents cash flowing out of the business toward its debtors. While collecting a monthly installment on a customer purchase financed 18 months ago shows cash flowing into the business. The list goes on.

Cash flow can be positive or negative. Positive cash flow means a company has more money moving into it than out of it. Negative cash flow indicates a company has more money moving out of it than into it.

Types of Cash Flow

Operating cash flow: This refers to the net cash generated from a company’s normal business operations. In actively growing and expanding companies, positive cash flow is required to maintain business growth.
Investing cash flow: This refers to the net cash generated from a company’s investment-related activities, such as investments in securities, the purchase of physical assets like equipment or property, or the sale of assets. In healthy companies that are actively investing in their businesses, this number will often be in the negative.
Financing cash flow: This refers specifically to how cash moves between a company and its investors, owners, or creditors. It’s the net cash generated to finance the company and may include debt, equity, and dividend payments.

Related: Financial Terminology: 20 Financial Terms to Know

The Cash Flow Statement

Cash flow is typically reported in the cash flow statement, a financial document designed to provide a detailed analysis of what happened to a business’s cash during a specified period of time. The document shows different areas where a company used or received cash and reconciles the beginning and ending cash balances.

Go to the alternative version.

The Difference Between Cash Flow and Profit

The key difference between cash flow and profit is while profit indicates the amount of money left over after all expenses have been paid, cash flow indicates the net flow of cash into and out of a business.

Which Is More Important: Cash Flow or Profit?

Investors and business owners are often in search of a single metric for understanding the health of a company. They want one line item in a financial statement to determine whether they should make an investment or pivot their business strategy. In these instances, cash flow and profit are often pitted against each other. But which is more important?

There isn’t a simple answer to that question; both profit and cash flow are important in their own ways. As an investor, business owner, employee, or entrepreneur, you need to understand both metrics and how they interact with each other if you want to evaluate the financial health of a business.

For example, it’s possible for a company to be both profitable and have a negative cash flow hindering its ability to pay its expenses, expand, and grow. Similarly, it’s possible for a company with positive cash flow and increasing sales to fail to make a profit—as is the case with many startups and scaling businesses.

Profit and cash flow are just two of the dozens of financial terms, metrics, and ratios that you should be fluent in to make informed business decisions. By gaining a thorough understanding of key financial principles, it’s possible to advance professionally and become a smarter investor or business owner.

Are you interested in gaining a toolkit for making smart financial decisions and the confidence to clearly communicate those decisions to stakeholders? Explore our online finance and accounting courses and discover how you can unlock critical insights into your organization’s performance and potential.

This post was updated on April 19, 2022. It was originally published on April 21, 2020.

Data Tables

Company A - Statement of Cash Flows [Alternative Version]

Year Ended September 28, 2019 [In millions]

Cash and cash equivalents, beginning of the year: $10,746

OPERATING ACTIVITIES

ActivityAmountNet IncomeAdjustments to Reconcile Net Income to Cash Generated by Operating Activities:Depreciation and AmortizationDeferred Income Tax ExpenseOtherChanges in Operating Assets and Liabilities:Accounts Receivable, NetInventoriesVendor Non-Trade ReceivablesOther Current and Non-Current AssetsAccounts PayableDeferred RevenueOther Current and Non-Current LiabilitiesCash Generated by Operating Activities

37,037

6,757
1,141
2,253

[2,172]
[973]
223
1,080
2,340
1,459
4,521
53,666

INVESTING ACTIVITIES

ActivityAmountPurchases of Marketable SecuritiesProceeds from Maturities of Marketable SecuritiesProceeds from Sales of Marketable SecuritiesPayments Made in Connection with Business Acquisitions, Net of Cash AcquiredPayments for Acquisition of Intangible AssetsOtherCash Used in Investing Activities

[148,489]

20,317

104,130

[496]

[911]

[160]

[33,774]

FINANCING ACTIVITIES

ActivityAmountDividends and Dividend Equivalent Rights PaidRepurchase of Common StockProceeds from Issuance of Long-Term Debt, NetOtherCash Used in Financing Activities

[10,564]

[22,860]

16,896

149

[16,379]

Increase / Decrease in Cash and Cash Equivalents: 3,513

Cash and Cash Equivalents, End of Year: $14,259

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Company B - Annual Trial Balance [Alternative Version]

September 28, 2019 [In thousands]

AccountsDebitCreditCash and cash equivalentsAccounts receivableInventoryOther current assetsProperty, plant & equipmentLong-term intangible assetsOther long-term assetsCurrent portion of long-term debtAccounts payableAccrued expensesOther current liabilitiesLong-term debt, less current portionOther long-term liabilitiesCommon stockRetained earningsNet SalesCost of SalesSelling and operating expensesGeneral and administrative expensesOther incomeGain or loss on financial instruments, netGain or loss on foreign currency, netInterest expenseIncome tax expenseTotal

260,652
467,976
676,089
116,775
985,563
1,223,400
31,093
	14,689
	312,170
	242,427
	27,777
	236,282
	281,588
	1,392,183
	771,200
	4,358,100
2,738,714
560,430
293,729
	960
	5,513
12,649
18,177
257,642
7,642,889	7,642,889

Company B Income Statement

For Year Ended September 28, 2019 [In thousands]

ActivityAmountNet SalesCost of SalesGross ProfitSelling and Operating ExpensesGeneral and Administrative Expenses Total Operating ExpensesOperating IncomeOther IncomeGain [Loss] on Financial Instruments[Loss] Gain on Foreign CurrencyInterest ExpenseIncome Before TaxesIncome Tax ExpenseNet Income

4,358,100
2,738,714
1,619,386
560,430
293,729
854,159
765,227
960
5,513
[12,649]
[18,177]
740,874
257,642
483,232

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What is the name of the financial statement that summarizes a firm's revenue and expenses over a period of time?

What are the differences between a balance sheet and income statement?.

What do you call the financial statement that summarizes all revenues expenses and profit or losses of the business?

A profit and loss statement [P&L], or income statement or statement of operations, is a financial report that provides a summary of a company's revenues, expenses, and profits/losses over a given period of time. The P&L statement shows a company's ability to generate sales, manage expenses, and create profits.

What are the 3 financial statements?

The income statement, balance sheet, and statement of cash flows are required financial statements. These three statements are informative tools that traders can use to analyze a company's financial strength and provide a quick picture of a company's financial health and underlying value.

What is a balance sheet vs income statement?

The balance sheet offers a snapshot in time, illustrating all that your company currently owns [assets and equity] and owes [liabilities]. The income statement, on the other hand, records your revenue and expenses [and, consequently, net profit] within a specific period of time.