Profit is not cash flow.

 Profit is not cash flow.


You can be profitable on paper and still go bankrupt if you don’t have enough cash to cover your spending.


That’s why cash flow problems are responsible for 82% of business failures.


And when a business fails, the impact is massive:


• Business valuation plummets

• Economic slowdowns

• Career setbacks

• Investor losses

• Job losses


Not to mention the psychological toll on entrepreneurs, their teams, and their families.


But here’s the good news:

This is entirely preventable.

All you need to do is learn your cash flows.


There are three types of business activities that affect cash flow.

Mastering these three together is how you win.


Here’s how:


1️⃣ Operating Activities


>> These are the day-to-day sources and uses of cash in your business.

Think cash from sales, payments for purchases, and operating expenses.


How to Master Operating Cash Flow:


☑️ Monitor your cash conversion cycles — identify inefficiencies in receivables, payables, and inventory management.


☑️ Run sensitivity analyses to see how changes in sales, costs, or credit terms will affect your cash flow.


2️⃣ Investing Activities


>> This involves buying and selling long-term assets like property, equipment, or investments.


These represent your investment in future growth.


How to Master Investing Cash Flow:


☑️ Use capital budgeting techniques like NPV (Net Present Value) or IRR (Internal Rate of Return) to prioritize investments.


☑️ Ensure you have enough operating cash to cover these investments or arrange the right financing.


☑️ Analyze how your investments are impacting your overall cash flow.


3️⃣ Financing Activities


>> These include transactions with owners and creditors — like borrowing, issuing equity, or paying dividends.


How to Master Financing Cash Flow:


☑️ Find your optimal balance between debt and equity — weigh the costs, risks, and cash flow impacts.


☑️ Ensure your operating cash can cover your debt payments, or plan for refinancing if needed.


☑️ Evaluate how your dividend policies impact your cash flow, leverage, and overall shareholder value.


Here’s the truth:


Profit may look good on paper, but it’s cash that keeps your business alive.


If you don’t master the three types of cash flow — operating, investing, and financing — your business will always be at risk

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