Free Cash Flows Today I want to talk about free cash flows, a critical element in implementing any of those decision rules. Remember, there are two components to NPV. There are Free Cash Flows, and there is a discount rate, because NPV if you recall from last time, is little more than just a discounted stream of cash… Read More »
Cash Flow Forecasting Making Cash Flow Smooth and Easy Setting a target One of the best ways to have a good control over cash flow is to have a frequent forecast that is properly maintained. If the owner gets a weekly forecast, he can easily have an outlook for his business for the next year… Read More »
Understanding Cash Flow Management There are many aspects of managing finances of a company. One of these is cash flow management that looks after cash flow, whether inflows or outflows. Understanding this concept is essential to avoid any liquidity crisis in the business. If cash with a business runs low and there is no chance of… Read More »
Conventional Cash Flows In Conventional cash flows, cash outflow occurs only once at the start of the project. Example of Conventional Cash Flows: For example, when we take loan from banks, we withdraw whole amount from the account once and pay back to bank in installments till we pay off full principle amount plus any… Read More »
Project Analysis – Capital Budgeting Techniques Net Present Value Example We are considering following project for investment purpose. Initial cost of the project: $800,000 Project Life: 5 years Annual Net Operation Profit:… Read More »
Discounted Cash Flows – Capital Budgeting Techniques We have discussed earlier that accounting rate of return & payback period ignores time value of money and cash flow trends. Means cash inflow of $5000 in the first year and $50 in the fifth year is just as good as $50 in the first year and $5000… Read More »
Annuity Due and Ordinary Annuity – Capital Budgeting Techniques We often encounter situations where we have multiple cash flows of same amount. A very common example of such cash flows is loan repayment plan where borrower is asked to repay the loan by making equal installments over some period of time. Almost all home mortgages, car… Read More »
Cash Flow and Capital Budgeting Cash Flow Definition Fund Flow or Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business during a specific period of time. Why is cash flow important? The success of any business can be determined through its capacity to generate positive cash flows.… Read More »
Capital Budgeting Process Capital Budgeting Process is a process of identifying and evaluating projects where businesses are expected to receive cash flows over a period longer than one year. Any corporate capital budgeting decisions that can affect future earnings can be evaluated using this framework. Examples of Capital Budgeting Decisions: For example, decisions about whether to… Read More »