HARIOM JHA

  Present Worth Method of comparison In this method of comparison the cash flow of each alternative will be reduced to time zero by assume that interest rate I then depending on the type of decision the best alternative will be selected by comparing the present what amount of the alternatives. The sign of various amounts at different points in time in a cash flow diagram is to be decided based on the type of the decision problem. In a cost dominated cash flow diagram the cost (outflows) will be assigned with positive sign and the profit revenue Salvage value all the inflows etc. will be assigned with negative sign. In a revenue/profit dominated cash flow diagram the profit revenue Salvage value or inflows to an organisation will be assigned with positive signs. The cost or outflows will be assigned with negative sign. In case the decision is to select the alternative with the minimum cost than alternative with the least present worth amount will be selected. On the other hand if

  Cash flow Diagrams and Interest rates What is cash flow? The net amount of cash and cash equivalents being transferred in and out of a company is called cash flow. What is cash flow diagram? Cash flow diagrams are graphical representation of cash flows (inflows and out flows) along a time line. Individual inflows or outflows are designated by vertical lines and relative magnitude can be represented by the heights of lines. Cash inflows are designated by vertical lines above the axis and cash outflows below the time line axis. Inflows take a positive sign whereas outflows take negative sign. Cash flow diagrams involve magnitude and direction fulfilling the properties of flow. There are five types of cash flow transaction:- single cash flow Uniform cash flow Linear gradient series Geometrical gradient series irregular series Let’s discuss each of the above cash flow transactions. Single payment cash flow : It involves a single present or future cash flow. The