Project Cash Flow | Advantages & Disadvantages of Project Cash Flow

Project cash flow

A cash flow enables you to create a short-term forecast that enables you to determine how you are going to get money for the project and how you are going to pay for your expenses. Cash inflows usually arise from financing, operations and investing, while cash outflows mainly result from expenses.

Project cash flow means identification, and measurement of cash flows relevant to project evaluation.

Cash flow are used in project analysis because

1. They measure actual economic growth

2. They occur at identifiable time points

3. They have indefinite directional flow

4. They are free of accounting definitional problem

Advantages of project cash flow

1. Incremental future sales revenues

2. Incremental initial outlay

3. Initial future production cost

4. Incremental future salvage value

5. Incremental working capital outlay

6. Incremental future taxes

Disadvantages of project cash flow

1. Changed future depreciation

2. Reallocated overhead costs

3. Adjusted future accounting profit

4. The cost of unused idle capacity

5. Outlay incurred in the past