Cash Flow and Its Components in Investment Valuation

Abstract

  Objective: The objective of this study is to provide a reflection on concepts and techniques used in investment analysis and evaluation with the aim of contributing to their clarification, as well as their practical application.   Theoretical Framework: The article begins with a brief review of the literature on the concept of cash flow, continuing with the suitability of the concept in investment analysis and a detailed analysis of its components from a theoretical and practical point of view, in the context of investment appraisal.   Method: The descriptive research method was used, as it is the most appropriate to the objective, making it possible to analyze the values relating to an investment project, as a way of demonstrating the validity and relevance of the concepts presented.   Results and Discussion: Details are given of how the periodic cash flow portions are constructed, how the value of the components is determined for the times after the time of analysis and their transformation into equivalent values that make it possible to transform the periodic values into the project's cash flow.   Conclusion: The concept of cash flow was discussed and clarified, emphasizing the temporal consideration of periodic non-addable cash flows. An example was given of how periodic cash flows can be determined beyond the study periods in concrete situations involving investments in real assets.