Question

1. Explain factors affecting the estimation of cash flow!

2. What are the difficulties of estimating cash flow? Explain your answers

Answer 1

There are many factors which can affect estimation of cashflow. Few of them are:

a) Account receivable

b) Credit terms

c) Credit Policy

d) Inventory

e) Account payable and cashflow

It is very difficult to estimate cashflow because it would be very uncertain to estimate what account receivables an credit terms be in future. All these factors depend on future things and there are many stakeholders who can affect the cashflow. Hence it is very difficult to estimate correct cashflows.