Cash flow and revenue are terms used in finances and business firms to indicate the profit and loss they face. They are the indirect values that show any business’s growth and a possible rise in the industry.
It is necessary to keep a tab of all the cash flow that a business sees to ensure that the company is having proper growth.
Key Takeaways
- Cash flow represents the movement of money in and out of business.
- Revenue is the income generated from business operations.
- Cash flow is crucial for liquidity and solvency, while revenue indicates a company’s ability to generate sales.
Cash Flow vs Revenue
Revenue is the total amount of money a company earns from its operations, such as selling goods or offering specific services. Cash flow refers to the amount of cash that flows in and out of a company over a certain period. Cash flow takes into account both revenue and expenses.
Cash flow is the primary value or cash amount that a business owner adds to their business so that new products can be made or more services can be made available for customers, thereby increasing the profit value of the owners.
Cash flow can never be stopped without the owner’s consent, as it is the only thing that keeps a business open.
Revenue is the eventual income obtained by any business owner after they start receiving an amount as their profit. Revenue always depends on the cash flow.
The greater the cash flow into the business, the higher the revenue the owner can get from the company. A loss in business would mean a drop in the revenue the owner collects.
Comparison Table
| Parameters of Comparison | Cash Flow | Revenue |
|---|---|---|
| Always a Positive Value | Yes | No |
| Financial Statement | Input in a business | Income from a business |
| Does One Depend on The Other | No | Yes |
| Different Types | Many types | Only 2 |
| High Value Indicate Good Growth In Business | Not necessarily | Yes |
What is Cash Flow?
The total amount of cash or any such assets used to increase the business or the financial statement of a company is called the cash flow.
All the money that is regarded as a part of cash flow is diverted to the business to boost the output in the form of products or other sales.
Cash flow gives a business firm its life as it generates all kinds of income and the money it produces.
Maintaining a positive cash flow is always necessary so that the business doesn’t see a downfall in the eventual course of time.
A positive cash flow increases the company’s or the shareholders’ assets many folds.
Such an increase in assets is, an additional increase in the company’s holdings and profits.
These assets might prove instrumental in helping pay off debts that might have occurred during the company’s growth.
Such assets could also be reinvested in the company itself,, thereby increasing its share market value and the shareholders’ value.
These assets could also be used as a cushion in cases of different debts and financial issues that the company might face.
The company’s rise through its cash flow is measured in terms of many other values.
One of those is operating cash flow which is the total amount of money the company gains from its sales and services.
The next calculating value is the investing cash flow which is the amount of money the company gains from investments.
The final value is the financial cash flow, which is the average value used as open funds to the company.
What is Revenue?
The amount that the business unit receives as its profit that could be used to pay employees and buy more equipment is called revenue.
Revenue can only include the monetary value gained through the primary proceedings of the business.
This means what the company sells or the services they pledge to provide. It cannot include money earned through the investments of the company.
Other activities that form a sideline business for the significant business are also not counted under the revenue as it is not a part of the primary or parent income source.
The revenue is not the total amount of money but the return value of sales of goods and services.
It is obtained after deducting the costs needed for employee payment and the purchase of raw materials, etc.
The company pays off all the additional costs incurred by the company through the revenue.
The leftover is the actual profit gained by the business firm.
It is not always necessary that the company’s revenue must be a positive value as there might be occurrences where the company might go into small losses.
At such times, the company might have to take care of the additional expenses from their pockets.
A positive revenue always shows that the company is having significant growth and has seen only profits for a long time.
Two types of revenues are seen in most of the business units or small start-up companies.
One of them is the operating income. This is the money gained as profit from the company’s business alone and not from other sidechains or other investments.
Another revenue is the non-operating income. This is seen as secondary income as it isn’t the money obtained through the sale of a share or any asset linked to the company.
Main Differences Between Cash Flow and Revenue
- While cash flow is always a positive value because if it is negative, there can’t be any business firm running underneath that; revenue could be either positive or negative.
- Cash flow is an input statement that means it is the amount in financial terms needed to support a business whereas revenue is the income statement that shows the income of the firm alone.
- It is not a necessity that cash flow should depend on the revenue, but revenue in many ways is directly linked to the cash flow.
- Cash flow could be in many different forms, such as money, assets, investments, etc, but revenue is more than not just in cash.
- A high revenue indicates that the business is doing great but a high cash flow alone can’t decide how good a business is doing.
- https://www.sciencedirect.com/science/article/pii/0304393295012230
- https://www.degruyter.com/document/doi/10.1525/9780520909540/html
Last Updated : 13 July, 2023
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
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