Profits and Cash Flow
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What is the difference between profits and cash flow? Why can a company outgrow its cash?
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Solution Summary
This solution lists four main differences between profits and cash flow, it also explains the situation where a company can outgrow its cash.
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The difference between both is as follows::
1. Higher depreciation will lead to less profits as it is non cash expenditure
2. Higher amortization of expenses will lead to reduction in profits as it is non cash expenditure
3. The company, which is highly geared operationally and financially, generates high cash flows but little profit. ...
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