Profit or cash flow

Privately-held companies tend to focus on cash flow as a measure of success and financial health. Why? Because cash flow is a significant part of working capital for most small businesses. Positive cash flow contributes significantly to sustaining operations and funding growth.

A business with poor cash flow is in more imminent danger of failing than a business with poor profits.

Profits are a universal measure of financial success, especially from a long-term standpoint. And like cash flow, profits help fund growth. Public companies cannot attract capital long-term without profits.

When evaluating a business, wise investors look at both profits and cash flow as a sign of a healthy company.