Test your knowledge about profit and cash
Do you know the difference between profit and cash? There is a good chance you don’t know there is a difference between the two most important concepts in finance.
Take the quiz and test your knowledge. I give you 10 situations. It’s up to you to determine how they affect the profit and cash of a company.
A brief explanation about the difference first?
Here you’ll discover what these two terms mean and how they relate to each other. This knowledge will help you master the logic of financial thinking.
What is cash?
Understanding cash is easy! Cash is the money in your bank account, plus possibly the money that is in your cash register. The money in your cash register is losing importance. Thus, most companies let the majority of their money pass through their bank account.
What is profit?
Understanding profit (or loss) is not easy at all. Think of it as a health indicator: every year your accountant calculates whether your sales were profitable or not.
The definition of profit looks like this:
Profit = Sales – Corresponding costs
To calculate your profit, answer 2 questions:
- How much did you sell this year?
- Was this enough to cover all the costs needed to generate the sales?
Good to know, profit can also be calculated on a quarterly basis, monthly basis,…
10 transactions… what is their impact on profit and/or cash?
The quiz helps you understand what profit really means. In 10 questions, you are presented with different situations. You determine how each affects the profit and cash of your business.
To keep you from sweating too much, you don’t have to take into account VAT or other taxes.
Ready?