What Is Positive Cash Flow and Negative Net Income?

Finance
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Cash flow is the net amount of cash and cash-equivalents being transacted in and out of a company in a given period. If a company has positive cash flow, the company’s liquid assets are increasing. Net income is the profit a company has earned, or the income that’s remaining, after all expenses have been deducted. Net income is commonly referred to as the bottom line since it sits at the bottom of the income statement. Yes, there are times when a company can have positive cash flow while reporting negative net income. But first, we’ll need to explore how cash flow and net income relate to each other.

KEY TAKEAWAYS:
It is possible for a company to have positive cash flow while reporting negative net income.
If net income is positive, the company is liquid.
If a company has positive cash flow, it means the company’s liquid assets are increasing.
A company can post a net loss for a period but receive enough cash from borrowing or other cash inflows to offset the loss and create positive cash flow.
Understanding Net Income and Cash Flow
Net income is calculated by subtracting the costs of doing business, including expenses, taxes, depreciation, and interest on debt from total revenue. If net income is positive, the company is liquid and has a higher probability of paying off its debts, paying dividends to shareholders, and paying its operating expenses.

Cash flow is reported on the cash flow statement, which shows where cash is being received and how cash is being spent. Cash flow is the net amount of cash and cash-equivalents being transacted in and out of a company in a given period. If a company has positive cash flow, it means the company’s liquid assets are increasing.