📚 Valuation Myth: Net Income = Free Cash Flow

~ Certified Business Appraiser

The Myth:
Net income on the P&L reflects how much cash the company produces.

The Reality:
Free cash flow adjusts for CapEx, changes in working capital, taxes, and other real cash needs. A profitable business on paper can still be cash-starved in reality.

Why It Matters:
Mistaking net income for cash flow can dramatically distort valuations and lending decisions.

Practical Tip:
Build valuations on sustainable free cash flow — not accounting profits.