Cash Flow: Definition, Uses and How to Calculate
Suppose a company provides consulting services to a client in December but does not receive the payment until the following January. From an accounting perspective, the revenue from the services rendered in December would be recognized in the income statement for that month, even though the cash is not received until January. This is known as accounts receivable, where the revenue is recognized when it is earned, regardless of the actual cash flow. The income statement measures a company's financial performance, such as revenues, expenses, profits, or losses over a specific period of time. A company with longer payment terms for...
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