Have your say: Profitability or Liquidity?
Most business owners see growth as the solution to a cash-flow problem. That’s why they often achieve their goal of growing the business only to find they have increased their cash-flow problems in the process. Plan for growth and the related cash outflow in advance, so not to be badly surprised.
When a business goes bad with money, selling more does not necessarily means improving liquidity. The margins is what matters.
Net Profit is an absolute term: sales revenue minus costs. Profitability is a relative measure: it indicates the gains or losses made relative to what created profit, namely, relative to capital invested, assets employed, sales, expenses.
What is your experience? Is it true that when a business owner want to speed up the growth, sales might happen at any price and then the business might collapse?