What is the real difference between the “accounting result” (profit) and “cash” (liquidity)?

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Accounting profit is governed by the accrual principle (it records income and expenses when they arise, for example, when an invoice is issued). Cash flow is governed by the actual flow of money (when that invoice is actually collected or paid). An SME can be highly profitable on paper (making a profit) and still go bankrupt due to a lack of liquidity if its customers pay late.

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