A business plan is a comprehensive guide that outlines a company's goals, strategies, and financial projections, essential for both new ventures and established businesses seeking capital or strategic direction.
Differential analysis examines the impact on costs and revenues of specific management decisions by focusing on differential (or incremental) cash flows. It considers only those costs or revenues that will change as a result of a specific decision.
Duration is a measure often used in fixed-income investing to assess the sensitivity of a bond's price to changes in interest rates by calculating the average life of the discounted values of the cash flows associated with a bond.
Economic value is the present value of future cash flows expected to be generated by an asset. It provides a measure of the worth of an asset considering its future income and cost streams.
Financial adaptability refers to the ability of an accounting entity to take effective action to alter the amounts and timing of cash flows so that it can respond to unexpected needs or opportunities.
The Internal Rate of Return (IRR) is a financial metric used to evaluate the profitability of an investment by calculating the rate of return where the net present value (NPV) of cash flows equals zero.
The time span from the acquisition of an investment to its final disposition. It encompasses all relevant investment contributions, cash flows, and resale proceeds, providing the best measure of the rate of return from the investment over its entire duration.
Out-of-pocket costs refer to the additional expenses that a company or individual will have to pay as a direct result of a specific business decision. These costs can play a crucial role in decision-making, especially in scenarios where cash resources are limited.
A post-completion audit involves comparing the actual cash flows with the forecast cash flows for an investment to assess the validity of the initial financial projections and ultimately improve future investment decisions.
The Profitability Index is a financial metric used to evaluate the profitability of an investment or project, calculated by dividing the present value of future expected cash flows by the initial investment.
The Projection Period refers to the time duration used for estimating future cash flows and the resale proceeds from a proposed investment. Commonly used in financial analyses, it helps in forecasting and valuing investments, especially in real estate.
In capital budgeting and portfolio management, the risk-adjusted discount rate is the discount rate used in calculations of present value to reflect the level of risk embodied in the cash flows being considered.
A method used in decision making to evaluate the impact of variations in key variables on projected outcomes, helping to identify the degree of risk associated with a decision.
