Why profit is not cash
Profit is an opinion about a year; cash is what happened in it. The two are meant to differ — that is what accrual accounting is for — but the size of the gap is not a detail, and it is not the same in every sector. Now that the cash-flow statement is in this catalogue alongside the income statement, the gap can be measured rather than asserted. Both tables below are recomputed from the filings at every data refresh.
Cash in, and cash straight back out
Two ratios tell most of the story. The first is operating cash flow divided by net income: how much cash the business produced for each unit of reported profit. It is usually above one, because depreciation and amortisation reduce profit without any cash leaving the company. The second is capital expenditure divided by operating cash flow: how much of that cash went straight back into property, plant and equipment before anyone else could be paid.
| Sector | Companies | Cash ÷ profit (median) | Capex ÷ cash (median) |
|---|---|---|---|
| Utilities | 91 | ×2.22 | 104.7% |
| Energy | 100 | ×2.53 | 52.4% |
| Materials | 116 | ×1.57 | 40.5% |
| Consumer discretionary | 247 | ×1.69 | 30.3% |
| Communication services | 73 | ×2.40 | 30.3% |
| Consumer staples | 80 | ×1.64 | 28.4% |
| Industrials | 372 | ×1.67 | 24.2% |
| Real estate | 109 | ×2.05 | 23.8% |
| Healthcare | 171 | ×1.64 | 17.6% |
| Technology | 362 | ×1.77 | 9.6% |
| Financials | 245 | ×1.44 | 4.2% |
Read the two columns together rather than separately. A high first column on its own says a business converts profit into cash well; a high second column says most of that cash is committed before it becomes free. A sector can score well on the first and still have very little left over, which is the ordinary condition of anything that owns a lot of physical assets — networks, plants, fleets, stores. Nothing here says which arrangement is better. Both are ways of running a business, and one of them builds the thing the other one rents.
Medians, not averages: in a sector of a few hundred companies one outlier with a near-zero denominator would carry the row. Sectors with fewer than twenty companies reporting the relevant lines are left out entirely, for the same reason a percentage computed from six companies is not a finding. And only companies whose profit and operating cash flow are both positive are counted — there is no such thing as converting a loss into cash at a ratio.
Where the gap is largest
The table below takes companies reporting at least $1 billion in net income and positive operating cash flow, and ranks them by free cash flow minus profit — that is, operating cash flow, less capital expenditure, less reported profit. The five largest gaps in each direction are shown.
| Company | Net income | Operating cash flow | Capex | Free cash flow | Free cash flow − profit |
|---|---|---|---|---|---|
| Amazon | $77.7B | $140B | $132B | $7.7B | −$70.0B |
| Alphabet | $132B | $165B | $91.4B | $73.3B | −$58.9B |
| Berkshire Hathaway | $67.0B | $46.0B | $20.9B | $25.0B | −$41.9B |
| Oracle | $17.0B | $32.0B | $55.7B | −$23.7B | −$40.7B |
| Microsoft | $102B | $136B | $64.6B | $71.6B | −$30.2B |
| Mercadolibre | $2.0B | $12.1B | $1.3B | $10.8B | $8.8B |
| AbbVie | $4.2B | $19.0B | $1.2B | $17.8B | $13.6B |
| General Motors | $2.8B | $26.9B | $9.3B | $17.6B | $14.8B |
| Vale | $2.4B | $25.7B | $3.8B | $21.8B | $19.5B |
| Capital One Financial | $2.5B | $27.7B | $1.6B | $26.1B | $23.7B |
Both directions are in the table on purpose. Showing only the negative half would suggest that reported profit is somehow inflated; showing only the positive half would suggest it is understated. Neither is the finding. The finding is that the two numbers measure different things, and a reader who knows only one of them knows less than they think.
What these numbers will not tell you
Operating cash flow moves with working capital, so a company that collected last year's receivables in January can look like it had a strong year in cash when nothing about the business changed. One year is therefore a weak basis for a judgement about any single company; the year-by-year series on each company page is the honest view. Capital expenditure has its own wrinkle: filers tag it with different XBRL concepts, and the tag that won for each company is shown on its page, because a figure built from a narrower tag is a smaller figure.
Companies that report no capital expenditure line at all — most financial firms, among others — are absent from the second column and from the gap table. Their free cash flow is not zero; it is unknown, and this site does not fill in an unknown with a zero. That rule costs coverage and keeps the number honest.
Banks and brokers deserve their own sentence, because their cash-flow statement does not mean what an industrial company's means. Operating cash flow at a bank absorbs changes in loans and trading assets, so it swings by tens of billions from one year to the next and is routinely negative in a year of balance-sheet growth. That is not cash burn and it is not distress; it is what the statement measures for that kind of business. Companies whose operating cash flow was negative are therefore left out of the gap table entirely — a bank at the top of a list titled "profit that did not become cash" would be a true number telling a false story.
Source: annual figures as filed with the SEC, read from XBRL. Free cash flow is calculated here as operating cash flow minus capital expenditure, from two lines in the same filing; every company page links to that filing. The tables above are recomputed at each data refresh.