Answer to Question #28255 in Finance for noorma

Question

why is the net cash inflow different to the net profit figure?

Answer 1

Net profit is the net income after all of the goofy accounting rules like accruals and depreciation. Also net income includes sales even if the customer has not paid us yet. It also includes expenses that have not been paid for. Assume we're talking about cash inflow from operating activities. If we borrow money, that is an inflow but no effect to net income.

Also, when you record depreciation expense, there is no cash outlay but our net income is reduced.