African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4154

Full Length Research Paper

Present and future value formulae for uneven cash flow based on performance of a business

Ameha Tefera Tessema
Construction and Business Bank SC, P. O. Box 20412, Addis Ababa, Ethiopia.  
Email: [email protected]

  •  Accepted: 14 July 2010
  •  Published: 30 September 2011

Abstract

Business firm's income is not constant or fixed from period to period. Because of this, a firm’s cash inflow or out flow is uneven. The decision of a firm either to invest or to borrow from creditors based on uneven cash in-flow need to have a future or a present value prediction formula. The problem to find future and present value formulae for uneven cash flow stayed unsolved for long period of time (Pandey, 1999). However, in this paper, I want to show future and present value of uneven cash flow prediction formulae based on the performance rate  of a business. The firm cash out flow either for investment or for repayment of the borrowed loan growth according to the performance rate (p) of the firm. The Performance rate (Pn) is a percentage by which the current performance of the business exceeds the previous. Therefore, the firm cash out flows either for investment or for repayment of the borrowed loan growth according to the performance rate (p) of the firm.

 

Key words: Uneven cash flow, present value formula, future value formula, performance rate, nonperforming loan.