In the past there are many financial crisis that threatened the market. In this article, we will discuss on a company whether should concern on profit earning or cash generating.

Profit is not equal to cash. A company can making huge profit but with negative cash flow. A company can easily make profit by selling at high margin, provide longer credit terms to buyer, provide discount in order to sell more and etc. Some of the company, they are able to show a preferable statement of profit and loss thought high volume of sell. In their statement of financial position as well by showing a huge amount of receivables. However, in their statement of cash flow is most likely showing a deficit and they are facing the stress of liquidation and bankruptcy especially during financial crisis.

The analogy “Cash is King” is suitable to apply in any circumstances. Cash is the most liquid asset. Company need cash to pay for employees’ salary, for repayment of loan, to meet the supplier credit term, operating costs and etc. Cash is important and crucial for a company operation and survival.

Cash is also important in grabbing the investment opportunities. As no one will know when the financial crisis will happen. Everyone is fear of financial crisis because its consequences are huge and may take long times to recover. However, we should never forget that crisis is a turning point.

Opportunities are arise and at that moment, cash is an essential element for us to grab the opportunity.

Theoretically, a company may never make a profit and yet survive, as long as the company continue to have enough cash to pay bills, rent, etc. Obviously without making a profit, the business will ultimately run out of cash, but that can take years in some circumstances. In conclusion, cash should always be the first concern.