When it comes to publicizing financial reports, all eyes will be on the profitability of listed businesses. However, those who understand more about corporate finance often agree with each other that "profit is an opinion, cash is a fact," implying that caution must be exercised with reported profit/loss figures because one thing - profit - is subjective, while the other thing - cash flow - is objective.

Profit is a subjective figure We all know that profit is the difference between revenue and cost, but understanding where revenue and expenses come from is not a simple matter for many people. First of all, it concerns how revenue is recorded. There are periods when revenues are recorded but the company's responsibility has only been partially fulfilled, such as revenues advanced by partners. These revenues make the profit picture look brighter, but in reality, they are liabilities on the balance sheet. Next is the nature of revenue, i.e. whether it is genuine or not. There are revenues that are actually virtual, arranged with ghost companies (non-existent companies), or artificial revenues with related parties, or revenues obtained by using tricks to make customers buy more than necessary. These bogus revenues distort profitability. In addition to revenue, other incomes also affect the profit of enterprises. There are many businesses reporting good profits but in reality, the profit does not come from the main business operations but from financial activities or other sources of income. For example, recently a company has announced a surge in profit, but the main contribution came from other sources, and in this specific case, it is from liquidating a joint venture company. Or sometimes there are businesses reporting a surge in profit thanks to income from financial activities. When considering expenses, the method of determining the value of inventory, for example, last-in, first-out (LIFO) or first-in, first-out (FIFO), also affects the cost of goods sold and thus affects profit. In addition, provisions or depreciation methods are expenses that directly affect the final profit of the company. Moreover, business expenses, especially salaries, bonuses, and allowances for the leadership, are items that can greatly affect company profit. Thus, the subjective intentions of corporate leadership can lead to changes in revenue and cost, thereby completely changing or manipulating profit. Cash flow as an objective figure Cash flow is usually calculated by the indirect method, stemming from net profit in the business statement but then adjusted for non-cash items such as depreciation, deferred taxes, stock-based compensation; and adjusted by changes in working capital such as accounts receivable, accounts payable, inventory; and adjusted for gains or losses that do not affect cash. Because business cash flow is more objective and the best representation of value, this is the golden criterion for valuing companies or valuing stocks, through discounted cash flow methods. There are companies reporting financial profits but cash flow is negative due to increased inventory or receivables. It is easy to find such companies during the financial reporting period. When operating cash flow is negative, this affects the liquidity of the business, increases borrowing pressure, and strips the business of the ability to invest for development. It is also an important sign of inefficient operational management, and if negative cash flow persists or worsens, the risk to the existence of the business is concerning. A comprehensive view is needed Although profit is an important financial indicator when assessing the health of a company, in the medium and long terms, a good business must ensure both profitability and growth. And to have growth, the business needs to make investments, and needs a healthy cash flow. In the context where financial reports are not strictly scrutinized, the use of tricks to manipulate profits will be common. Therefore, from the investor's perspective, even from the creditor's side, it is necessary to carefully examine revenue and cost items, verify the true nature of these items, especially high-risk items such as transactions with related parties. For individual investors with limited understanding of corporate finance, the role of mass media is quite important in disseminating information about the financial situation of listed companies. It is necessary to present the profitability picture as well as to provide more information, analysis of the cash flow of the business to help investors have a more comprehensive and thorough understanding. Of course, companies always want to create a good and promising image of themselves in the market, and sometimes they have to use tricks or even fraud. To mitigate risks, investors need to have an understanding of the nature of profit or loss, the quality of assets, the quality of debt, the quality of business cash flow. And to do so, programs to educate and protect investor rights need to be emphasized and developed further.