SharpFokus Short Cashflow Course – Lesson 1
📌 Cashflow vs. Profit: Why They Are Not Always the Same
⸻
🔹 The Theory: Cashflow & Profit Should Be Equal Over Time
In an ideal world, a company’s cashflow and profit should eventually match.
• Profit is what the company reports as earnings.
• Cashflow is the actual movement of money in and out of the company.
• Over the long run, cash generated should equal the profits reported.
But in reality, they are often very different—especially in Indonesia.
⸻
🔎 The Reality: Why Cashflow & Profit Often Don’t Match
🚨 Issue 1: High Investment That Fails to Generate Returns
🔹 In Indonesia, many companies invest aggressively in new projects, expansion, or assets.
🔹 However, these investments do not always lead to strong cash returns.
🔹 As a result, companies report profits while their cash reserves keep shrinking.
📌 Example:
• A company builds a new factory and records the investment as an asset.
• Profit remains high because investment costs are spread out over time.
• But cashflow is negative because real money was spent upfront.
💡 Takeaway:
👉 Just because a company reports profit doesn’t mean it’s generating cash.
⸻
🚨 Issue 2: Accounting Adjustments That Boost Profit But Don’t Affect Cash
🔹 Profit includes non-cash items like depreciation, asset revaluations, and unrealized gains.
🔹 These adjustments can make profit look better than actual cash performance.
📌 Example:
• A company owns land and revalues it higher, increasing reported profit.
• But no actual cash was generated from this revaluation.
💡 Takeaway:
👉 Always check whether profits come from real cash movements or just accounting adjustments.
⸻
🚨 Issue 3: Working Capital Changes Can Distort Cashflow
🔹 Companies with high sales growth may report strong profits but struggle with cashflow due to delayed payments.
🔹 If customers take too long to pay, cashflow remains weak despite rising profits.
📌 Example:
• A company sells more products and reports higher revenue.
• But customers haven’t paid yet, so cashflow remains low.
💡 Takeaway:
👉 Sales growth doesn’t always mean strong cashflow.
⸻
Pacioli Didn’t Track Cash—We Do
In 1494, Luca Pacioli gave us the balance sheet—but he didn’t separate profit from cashflow.
He measured profit by changes in capital, without showing where the money actually went.
Today, we know better: profit can include non-cash items, while cashflow shows the real movement of money.
That’s why SharpFokus goes beyond Pacioli—tracking actual cash to see whether a company is truly creating value.
Profit can lie. Cashflow tells the truth.
⸻
📌 Conclusion: Why Cashflow Matters More Than Profit
✅ Profit is an accounting number—it can be influenced by investments, revaluations, and working capital.
✅ Cashflow shows the real financial health of a company—whether it is actually generating cash or just reporting profits.
✅ In Indonesia, cashflow is often much lower than profit due to high investment spending and weak returns.
📌 Next Lesson:
In Lesson 2, we’ll explore how companies use cashflow—to pay debt, raise equity, or increase cash reserves.
👉 Go to Lesson 2
📌 Cashflow vs. Profit: Why They Are Not Always the Same
⸻
🔹 The Theory: Cashflow & Profit Should Be Equal Over Time
In an ideal world, a company’s cashflow and profit should eventually match.
• Profit is what the company reports as earnings.
• Cashflow is the actual movement of money in and out of the company.
• Over the long run, cash generated should equal the profits reported.
But in reality, they are often very different—especially in Indonesia.
⸻
🔎 The Reality: Why Cashflow & Profit Often Don’t Match
🚨 Issue 1: High Investment That Fails to Generate Returns
🔹 In Indonesia, many companies invest aggressively in new projects, expansion, or assets.
🔹 However, these investments do not always lead to strong cash returns.
🔹 As a result, companies report profits while their cash reserves keep shrinking.
📌 Example:
• A company builds a new factory and records the investment as an asset.
• Profit remains high because investment costs are spread out over time.
• But cashflow is negative because real money was spent upfront.
💡 Takeaway:
👉 Just because a company reports profit doesn’t mean it’s generating cash.
⸻
🚨 Issue 2: Accounting Adjustments That Boost Profit But Don’t Affect Cash
🔹 Profit includes non-cash items like depreciation, asset revaluations, and unrealized gains.
🔹 These adjustments can make profit look better than actual cash performance.
📌 Example:
• A company owns land and revalues it higher, increasing reported profit.
• But no actual cash was generated from this revaluation.
💡 Takeaway:
👉 Always check whether profits come from real cash movements or just accounting adjustments.
⸻
🚨 Issue 3: Working Capital Changes Can Distort Cashflow
🔹 Companies with high sales growth may report strong profits but struggle with cashflow due to delayed payments.
🔹 If customers take too long to pay, cashflow remains weak despite rising profits.
📌 Example:
• A company sells more products and reports higher revenue.
• But customers haven’t paid yet, so cashflow remains low.
💡 Takeaway:
👉 Sales growth doesn’t always mean strong cashflow.
⸻
Pacioli Didn’t Track Cash—We Do
In 1494, Luca Pacioli gave us the balance sheet—but he didn’t separate profit from cashflow.
He measured profit by changes in capital, without showing where the money actually went.
Today, we know better: profit can include non-cash items, while cashflow shows the real movement of money.
That’s why SharpFokus goes beyond Pacioli—tracking actual cash to see whether a company is truly creating value.
Profit can lie. Cashflow tells the truth.
⸻
📌 Conclusion: Why Cashflow Matters More Than Profit
✅ Profit is an accounting number—it can be influenced by investments, revaluations, and working capital.
✅ Cashflow shows the real financial health of a company—whether it is actually generating cash or just reporting profits.
✅ In Indonesia, cashflow is often much lower than profit due to high investment spending and weak returns.
📌 Next Lesson:
In Lesson 2, we’ll explore how companies use cashflow—to pay debt, raise equity, or increase cash reserves.
👉 Go to Lesson 2