When are the three estimates of risky cash flow used?
It is easy to calculate various capitals budgeting decision techniques such as net present value, internal rate of return and many more and making the investment decision. But it is reliable only when the cash flow estimates is correct.
One of the most complex tasks is to estimating the future cash flow, as future is full of uncertainty.
Risky cash flow means, when the future cash flow is less than as per the expectation of the management due to some certain or uncertain events then the cash flow is said to be risky.
There are various techniques used by the management for risk analysis it helps to provide the information about the expected and unexpected events that affects the goals and objectives of the organisation adversely.
It also helps the management to make future plans and protect the organisation for losses.
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