Revenue and income are NOT the same thing
Costs and expenses are NOT the same thing
Net income and free cash flow are NOT the same thing
Confused? Here's a quick breakdown:
Costs and expenses are NOT the same thing
Net income and free cash flow are NOT the same thing
Confused? Here's a quick breakdown:
Sales and revenue mean the same thing
Both are the money that comes in from customer payments
They both refer to the “top line” of the income statement
Both are the money that comes in from customer payments
They both refer to the “top line” of the income statement
Orders and sales are NOT the same thing
Orders are when a customer places a request for the future delivery of a product or service
Orders become sales when the product is actually shipped or service is actually performed
Orders are when a customer places a request for the future delivery of a product or service
Orders become sales when the product is actually shipped or service is actually performed
Costs are different from expenses
Costs are money spent on making a product or delivering a service (hence "cost of goods sold")
Expenses are money spent on developing, selling, accounting for, and managing the product or service
Costs are money spent on making a product or delivering a service (hence "cost of goods sold")
Expenses are money spent on developing, selling, accounting for, and managing the product or service
Costs and expenses both become expenditures when money is actually sent to the vendors to pay the bills
Profits, earnings, and net income all mean the same thing
They are the “bottom line” of the income statement
They all represent what is left over after all of the costs & expenses are subtracted from revenue
They are the “bottom line” of the income statement
They all represent what is left over after all of the costs & expenses are subtracted from revenue
Net income and free cash flow are not the same thing
Net income measures a company’s profitability on the income statement using accrual accounting
Free cash flow measures the actual cash flow that is available to shareholders on the cash flow statement using cash accounting
Net income measures a company’s profitability on the income statement using accrual accounting
Free cash flow measures the actual cash flow that is available to shareholders on the cash flow statement using cash accounting
Accrual accounting and cash accounting are not the same thing
Accrual accounting: revenue or expenses are recorded when they occur, not when payment is received or made
Cash accounting: transactions are recorded only when money goes in or out of an account
Accrual accounting: revenue or expenses are recorded when they occur, not when payment is received or made
Cash accounting: transactions are recorded only when money goes in or out of an account
Net income is an accountant’s opinion
Free cash flow is a fact
When forced to choose, I'll take free cash flow every time
Free cash flow is a fact
When forced to choose, I'll take free cash flow every time
Enjoy this thread?
Follow me @Brian_Stoffel_
I tweet about money, investing, antifragility, and personal finance
Follow me @Brian_Stoffel_
I tweet about money, investing, antifragility, and personal finance
Learning accounting is an incredibly useful business skill, but it's FILLED with nuance
@BrianFeroldi and I are teaching a live class on it in two weeks to explain it all to beginners
Interested? DM me for a coupon code
maven.com
@BrianFeroldi and I are teaching a live class on it in two weeks to explain it all to beginners
Interested? DM me for a coupon code
maven.com
Summary:
1: Revenue & Sales = Same
2: Costs = Making product/service
3: Expenses = Running the business
4: Profits, Earnings, Net Income = Same
5: Net Income = Accrual Accounting
6: Free Cash Flow = Cash Accounting
7: Accrual Accounting = 💳⌛️
8: Cash Accounting = 💵
1: Revenue & Sales = Same
2: Costs = Making product/service
3: Expenses = Running the business
4: Profits, Earnings, Net Income = Same
5: Net Income = Accrual Accounting
6: Free Cash Flow = Cash Accounting
7: Accrual Accounting = 💳⌛️
8: Cash Accounting = 💵
Loading suggestions...