– How can my business show a profit yet there’s no additional cash?
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Depending on the business, you have money wrapped up in stuff.
As an example, let’s say you are a landscaping business. You start out invest $15,000 of your own money, or borrowing it. You buy a $10k truck and $5k in equipment and start cutting grass. You start making money and paying yourself, paying for some advertising, repaying your investment.
You’ve taken in at least $15k in revenue, let’s say you’ve taken in $20k in revenue. Some of that is eaten up in operating expenses (fuel), some of that went to paying yourself (salary) and some went to paying off the equipment.
Now you’re investor or loan has been repaid. The company has $0 in debt. It no longer has that $20k in cash from revenue, but now it has assets. Those assets can either continue to be used to make more revenue, or sold off. If liquidating the company assets is the direction you go, then you’ll your cash. Right now your cash is in stuff, wether it be equipment, inventory, investment, etc.
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