What is the relationship between pure current value and cash flows?
The pure current value (NPV) is a concept that includes an understanding of what is happening to the company in terms of the inflow of cash into the company, as well as how this cash is spent. The Basic image represents what remains after the current value of cash flow to the business reduces the current value of cash flowing from the business model. The connection between the pure current value and the cash flows is that without knowing how much it comes and how much it is, there is no way to determine the pure current value.
In order to accurately assess the amount of available capital for the project, it is necessary to identify the current state of the net current value and cash flows. This process requires identifying the current amount of cash that comes into business. This may include cash generated as a result of capital investment and sales. Receiving from any source is part of the incoming cash flow and is available for use while driving everyday preservation and soto settle any other short or long -term debt obligations. The start of the process with a confirmed income number sets the soil to finally determine the actual NPV.
Together with the identification of the current amount of cash coming into business, it is also necessary to determine how much of this cash is about to compensate for different expenses. This means that with a pure current value and cash flows, emphasis is not only on what is accepted, but also on what is happening during the considered period. All types of payment are considered to be part of the process because all types of expenditure are probably settled from the income of the companies received. By deducting the outflow of cash from the inflow of cash for this period, the resulting value is a net present value.
Inability to identify all relevant data regarding the influx of Aoutgo of Cash will adversely affect the entire process involving pure current valueand cash flows. For example, if cash outflow data is lower than actual payouts, it means that the calculated net present value will be too high. As a result, business could take decisions that eventually create a certain level of financial difficulties. Exactly by assessing all types of cash transactions, the information used to determine the clean current value and cash flows to the data that help owners of enterprises to interview sound financial decisions for the upcoming period.