A firm has 100 million in revenue. does that mean that it has generated a cash flow of 100 million

Question

Business

Tamara Skinner

26 August, 01:23

A firm has 100 million in revenue. does that mean that it has generated a cash flow of 100 million

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Answers (1)

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Anne Hanna · Answer 1

According to the Revenue recognition principle, a revenue can be recognized even if the actual amount is not collected. In other words, revenue may or may not be collected in cash. The Sales may be a cash sales or credit sales and both may be recognized as Revenue for a particular accounting period.

Hence if a firm has 100 million in revenue that does not necessarily mean that it has generated a cash flow of 100 million. Because some part of the revenue may be on credit.

Hence the answer is NO.