Demystifying the terms liquidity, cash flow, revenue and profit

In the dynamic world of finance, various basic terms such as liquidity, cash flow, revenue, profit and others are often conflated or confused. Each term has its own meaning and contributes to a comprehensive understanding of a company's financial well-being. Below, we explain the key differences between these terms and introduce Aequitex, the factoring-marketplace, that is revolutionizing small and medium-sized enterprises' (SMEs') access to liquidity.

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• Liquidity refers to a company's ability to meet its short-term financial obligations without delay. It indicates how easily a company can convert its assets into cash to cover operating costs, debt repayments and other immediate liabilities. High liquidity ensures a company's resilience to unforeseen financial challenges.

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• Cash Flow refers to the movement of money in and out of a company. It is divided into three main types: operating cash flow, investing cash flow and financing cash flow. Operating cash flow refers to cash generated or used in the core business. Investment cash flow includes capital expenditures and investments. Financing cash flow includes activities related to the raising or repayment of capital.

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• Free cash flow is an important indicator of how much money is still available to a company after all operating costs and capital investments have been covered. It represents the funds available for growth, dividend payments, debt reduction or other strategic projects. A positive free cash flow is a good sign of a company's financial stability.

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• Extended cash flow expands the concept of free cash flow by taking into account additional financial elements such as tax payments, interest and other non-operating expenses. It provides a more comprehensive view of a company's financial health by including these critical factors that affect the availability of cash.

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• Revenue, often referred to as sales or turnover, is the total amount a company earns from the sale of its products or services. It is a peak figure that excludes costs and expenses. Revenue is an important indicator of a company's sales performance and the market demand for its offerings.

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• Profit, also referred to as net profit or profit below the line, is the excess of revenues over expenses. It represents the company's profit after deducting all costs, including operating, interest and tax expenses. Profitability is an important indicator for investors and stakeholders, as it shows the company's ability to generate returns on its investments.

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Aequitex, is a pioneering platform that brings together SMEs and investors in a digital factoring-marketplace and is a remarkable marriage of finance and innovation. Aequitex empowers SMEs by providing them with easy, fair and fast access to liquidity. On this dynamic platform, SMEs upload their invoices, which can be purchased by investors who then effectively invest in these companies. Aequitex's mission is reflected in every facet of these financial metrics, revitalizing SMEs' access to liquidity and changing the nature of cash flow, revenue and profit.

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