The following points highlight the seven main methods used in determination of cash flow from business activities of a firm. The methods are: 1. Payback Period Method 2. Accounting Rate of Return Method 3. Net Present Value Method 4. Internal Rate of Return (IRR) Method 5. Profitability Index (PI) Method 6. Discounted Payback Period Method 7. Terminal Value Method. 1. [...]
There are two alternative criteria available for ascertaining future economic benefits of an investment proposal, (i) accounting profit, and (ii) cash flows. The term 'accounting profit' refers to the figure of profit as determined by the Income statement or Profit and Loss Account, while ' cash flow' refers to cash revenues minus cash expenses. The difference between these two criteria [...]
This article provides a study note on Cash Flow for Investment Analysis:- 1. Conventional and Non-Conventional Cash Flows 2. Incremental Cash Flows 3. Determination. Conventional and Non-Conventional Cash Flows: When an initial cash outlay (outflow) is followed by a series of cash inflows of uniform or unequal amounts, it is called conventional cash flows. Most of the capital investment decisions [...]