ABSTRACT
Second, losses on the bottom line of the Income Statement do not mean that the business comes to an end. Oftentimes, businesses may have to go through hard times enduring poor operating performance with losses before they start growing successfully with profi ts. In extreme situations, businesses may continue its operations as long as they have enough cash despite losses from operations. Amazon.com is a good example. The company had reported losses continuously for long before it began generating profi ts. On the other hand, businesses that report signifi cant amount of profi ts will collapse if they run out of cash. For these reasons, cash is practically more critical than profi ts. Hence, cash is often called the “life blood” of a business. This section introduces the difference between profi t/loss and cash by itemizing the account titles explained in the earlier chapters. Then, the Statement of Cash Flows will be briefl y introduced.
