Cash and cash flow - OCRThe difference between cash and profit

Not all cash paid into a business is profit. A business must pay its costs from the money that comes into it. Once all costs have been deducted from all revenue, the amount that is left is the business’ profit.

Profit is usually calculated on an annual basis. However, calculating it monthly can help a business by showing that it is solvent and indicating whether it will be able to achieve its profit targets.