Profitable and out of cash confuses you
You have heard it can happen and cannot see how.
Courses
Start with three things you can do today
How to read a business's numbers and understand the story
Read a set of accounts and know what the business is doing.
Read the reporting period and accounting notes, then connect the income statement, balance sheet and cash flow statement. Profit and cash answer different questions. The worked example below shows why earning revenue does not necessarily put cash in the bank that day.
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A starting goal
I want to understand what financial statements say about a business. Teach me the basics of profit, cash flow, and the balance sheet and how they fit together.
Change any word so it fits your situation. The course is built from what you type and a few setup questions.
Start today
Three things you can do before the course exists.
Useful on their own. The course is for when you want the whole skill, not just the first move.
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Distinguish a sale from a collection
Original simplified accrual-accounting example: a business completes $1,000 of work on credit and pays $400 of related costs immediately. Assuming the revenue and expense are recognized in this period, profit from these items is $600, but their net cash movement is minus $400.
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Follow the receivable
Before payment, the customer owes $1,000: an account receivable. When the customer later pays, cash rises by $1,000 and the receivable falls by $1,000. Under the stated assumptions, collecting that invoice does not create another $1,000 of revenue.
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Check the scope before concluding
The example omits tax and other transactions. A company's full cash flow statement also separates operating, investing and financing activity. Read the notes and periods; do not treat profit as merely opinion or a cash balance as a complete verdict on the business.
Sources: U.S. SEC: financial statements and the difference between profit and cash. Practical examples are starting points, not promised results.
- Best for
- Business
- Prerequisites
- None. Bring the situation you have.
- Course length
- 7 to 30 lessons
- Pace
- Yours. One lesson at a time, as often as you like.
- Format
- Read it, or play the audio
- Access
- Available on the App Store and Google Play, with an optional early testing list
Before the course is built
Setup asks about your situation first.
Lesson 1 opens on the moment you describe, and the examples use your role. For this request, expect questions like these.
- Do you need this for your job, for investing, or to understand your own business?
- Have you looked at a set of accounts before, or is this the first time?
- Which number confuses you most: profit versus cash, or the balance sheet?
Right for now
If any of this sounds familiar, start here.
You skip the finance slides
The numbers go up on screen and you wait for the words to come back.
You run something and fly blind
The accountant sends statements and you file them unread.
Course arc
Where the course goes, in order.
Cadence writes the lessons for you, so the exact path follows your answers. This is the ground a course built from this sentence covers.
01 / 06Three questions, three statements
Did we make money, do we have money, and what do we own and owe.
The income statement
Revenue, costs and profit, and the judgment calls hidden in each line.
Cash flow
How recognition, timing and non-cash items can separate profit from cash movement.
The balance sheet
Assets, liabilities and equity, read as a snapshot of what the business has to work with.
Fitting them together
Following one transaction through all three statements.
Reading a real set
Applying the questions to accounts from a business you know.
What changes
What you will be able to do, and what you will stop believing.
You will be able to
Read the three statements
Know what each one answers and what it hides.
Connect profit to cash
Explain why the two differ and which one to worry about when.
Ask the right questions
Spot the numbers that need explaining, in your own business or someone else's.
Ideas this course corrects
Profit equals money collected
Revenue recognition, unpaid invoices and non-cash items can make profit and cash differ.
One statement tells the full story
Read the statements and notes together. A single balance or percentage change needs context.
Course questions
What to know before you start.
How to read a business's numbers and understand the story: what can I do today?
Distinguish a sale from a collection. Original simplified accrual-accounting example: a business completes $1,000 of work on credit and pays $400 of related costs immediately. Assuming the revenue and expense are recognized in this period, profit from these items is $600, but their net cash movement is minus $400. Follow the receivable. Before payment, the customer owes $1,000: an account receivable. When the customer later pays, cash rises by $1,000 and the receivable falls by $1,000. Under the stated assumptions, collecting that invoice does not create another $1,000 of revenue. Check the scope before concluding. The example omits tax and other transactions. A company's full cash flow statement also separates operating, investing and financing activity. Read the notes and periods; do not treat profit as merely opinion or a cash balance as a complete verdict on the business.
Is this a fixed course?
No. Cadence builds the course when you type the sentence and answer a few setup questions, so the lessons follow your situation. This page describes what a course built from this request covers. You see the whole path before Lesson 1.
Who is this course for?
Read the reporting period and accounting notes, then connect the income statement, balance sheet and cash flow statement. Profit and cash answer different questions. The worked example below shows why earning revenue does not necessarily put cash in the bank that day. It sits under Business in the Work & ambitions part of the library.
Do I need any prior experience?
No. Setup asks what you already know and where you want to use it, and the course starts from there. Bring a real situation if you have one; the examples are built around it.
How long does it take?
Most courses run 7 to 30 lessons. The course length is sized to what you asked for. You set the pace: one lesson at a time, as often as you like. Lessons can be read or played as audio.
Does this course award a certificate or degree?
No. Cadence is for practical self-learning and does not award accredited degrees or professional certification.
Start today
Type it, answer a few questions, open Lesson 1.
A starting goal
I want to understand what financial statements say about a business. Teach me the basics of profit, cash flow, and the balance sheet and how they fit together.
Want new features first?