For companies in the period of rapid expansion, it is not a bad idea to do it occasionally. In order to expand sales, it is normal to provide certain preferential policies to customers and allow larger-scale credit sales. But it would be wrong to call this phenomenon the norm.
Many listed companies have negative net operating cash flows and positive net profits.
To simply explain this situation, we can think that the company's sales are more on credit, or the company's purchases are more in cash, resulting in operating cash inflow minus operating cash outflow becoming a negative number. .
The cash flow statement is based on the cash basis, that is, only the money actually received or paid is counted. The income statement is on an accrual basis, so whether it is a purchase on credit or a sale on credit, costs and revenue are calculated accordingly.
For example, you bought goods for RMB 100 and then sold them on credit for RMB 150. Operating cash flow during this period is negative because there are no cash inflows. But the profit is ￥50 (assuming there are no bad debts). The cash flow statement is based on the cash basis, that is, only the money actually received or paid is counted. The income statement is on an accrual basis, so whether it is a purchase on credit or a sale on credit, costs and revenue are calculated accordingly.
The origin of credit sales
Credit sales is a common name for credit sales, which refers to sales on credit. Sales on credit are sales based on credit. After the seller signs a purchase agreement with the buyer, the seller lets the buyer take away the goods, and the buyer pays off the payment on a specified date or in installments in accordance with the agreement.
Open account originated in ancient times and is a product of the development of commodity circulation. In the "Diguan·Quanfu" of the ancient Chinese book "Zhou Li", there are already records about "credit" during the Spring and Autumn Period and the Warring States Period. In feudal society, with the development of commodity economy, "credit" gradually became a business habit. In the Song Dynasty, merchants usually paid for goods one year later.
In capitalist society, credit sales are more common, one is consumer credit, and the other is commercial credit between enterprises. The former is mainly used by capitalists as a means to attract customers and expand sales when there is overproduction in the capitalist economy, the purchasing power of the masses is low, and sales are difficult, usually in the form of installment payments.