Journal of Financial and Quantitative Analysis

Running head: TIME VALUE OF MONEY: SINGLE CASH FLOW
Time value of money: single cash flow
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TIME VALUE OF MONEY: SINGLE CASH FLOW1
Table of Contents
Question 1........................................................................................................................................2
Question 2........................................................................................................................................2
Question 3........................................................................................................................................3
Question 8........................................................................................................................................4
Question 9........................................................................................................................................4
Question 10......................................................................................................................................5
Reference.........................................................................................................................................7

TIME VALUE OF MONEY: SINGLE CASH FLOW2
Question 1
Cash flow considered as net amount for cash as well as cash equivalents that is moved
into and out of the business. At most essential level, the ability of the entity for creating value for
the shareholders is established by the ability for generating positive flows for cash or more
particularly, maximizing the cash flow over long term. Analyzing timing, uncertainty and
amounts for cash is 1 of most basic goal for financial reporting. Evaluation of cash flow
statement that reports operating cash flow, financing cash flow and investing cash flow is
required to assess the entity’s flexibility, liquidity as well as the overall financial performance
(Lewellen & Lewellen, 2016).
Positive cash flow signifies that the liquid assets of any entity are increasing that allows
to settle the debts, reinvesting into business, delivering return to the shareholders, making
payment for expenditures and delivering buffer against the future challenges for finance. The
entities with strong flexibility in context of finance may take advantages from profitable
investments. Further, it fares better in the downturns through avoiding costs of the financial
distress. For understanding the firm’s true profitability analysts analyze FCF (free cash flows) as
it states what is left with the entity for expanding the business or providing return to the
shareholders after making payment for dividends, debts and buyback (Chen, Sun & Xu, 2016).
Question 2
Present value (PV) is considered as value on any particular date for payment or any series
of the payment that is made at various times. Process for finding PV from FV is known as
discounting. Conversely, future value (FV) is used to measure future nominal sum of the money