Why is net income different from cash flow?

Net income is the profit a company has earned for a period, while cash flow from operating activities measures, in part, the cash going in and out during a company’s day-to-day operations.

Why is cash flow higher than net income?

If net income is much larger than cash flow from operations, it’s a signal that the company’s earnings quality-the usefulness of earnings-is questionable. If cash flow from operations exceeds net income, on the other hand, the company may be much healthier than its net income suggests.

Is net income the same as free cash flow?

In summary, net income represents the profits of a company from an accounting standpoint and thus includes non-cash expenses such as depreciation & amortization. Free cash flow, on the other hand, measures the actual cash flow that is available to shareholders.

Why is accounting income not equal to cash flow?

With accrual accounting, only the portion of the prepaid expense incurred during the reporting period will be deducted from revenues. Therefore, cash flow may suffer from the prepayment, but the expenses won’t take the same brunt.

Why is budgeted cash flow different from budgeted net income?

A budget differs from cash flow statement because a budget both projects how you expect to allocate the cash flow and records how the cash flow was actually spent at the end of the month.

Is cash flow equal to net profit?

Cash flow is the actual money going in and out of your business. Profit is your net income after expenses are subtracted from sales.