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PurposeThe purpose of this paper is to study the relationships between two distinct value orientations, that is, the terminal and instrumental. The effects of these value orientations on green attitude and green behavioral intentions for green products among young consumers in an emerging market against the backdrop of a value–attitude–behavior cognitive hierarchical framework has also been focused on in this study.Design/methodology/approachThe study espouses a hypo-deductive research design and the measures were conceptualized and advanced based on an inclusive review of the research studies conducted in the past. Anderson and Gerbing’s two-step research approach was used for partial least square structural equation modeling to assess the measurement and structural models with SmartPLS (v 3.2.6).FindingsThe findings suggest that the functional value is constantly essential, but not enough by itself, for envisaging green purchase behavior. The results show that both the terminal and instrumental values have a significant impact on green attitude and in turn, green attitude has a significant impact on green behavioral intentions. The instrumental value displays greater impact on both green attitude and green behavioral intentions compared to the terminal value. Additionally, the research also discloses that green attitude acts as a mediator in the relationship between terminal/instrumental value and green behavioral intentions.Research limitations/implicationsThis paper describes two broad, yet distinctive, value orientations (i.e. terminal versus instrumental) using cross-sectional data from the state capital of the country. Future research may scrutinize the findings’ (cross-cultural) generalizability using diverse data sets to assess value orientations and customers’ green behavioral intentions among young consumers.Practical implicationsThe research findings will enormously help green marketers and practitioners to recognize the roles of terminal and instrumental values in evolving green attitude and green behavioral intentions for green products among the young consumers, thereby helping to develop marketing strategies.Social implicationsThe current research provides evidence that in emerging markets such as India, young consumers exhibit value orientation toward environmental deterioration, holding a sense of responsibility in their consumption pattern. This may pave the way forward for sustainable businesses.Originality/valueThis study is objectively a pioneering one that attempts to explore the relationships between the value orientations in terms of instrumental and terminal values and their effects on green attitude and green behavioral intentions toward green products using Rokeach’s (1973) two-dimensional measure of values among young consumers, which is quite novel to the existing body of knowledge. Moreover, this paper has surveyed these relationships in a different research context, which can expand the knowledge about green consumer behavior in emerging markets.

PurposeThe purpose of this paper is to use fundamental models incorporating structural relationships within the firm in a terminal value model for the second stage of a two-stage valuation model utilized to estimate the value of a company.Design/methodology/approachThe innovation is that growth options are identified within the structural relationships and a model capturing the value of the optionality is incorporated in the second stage of the two-stage valuation model.FindingsSignificant outcomes are that terminal value is shown to be a large portion of a company’s total value and the price behavior for initial public offerings produced by the model is consistent with the result of empirical studies.Originality/valueThis paper explicitly incorporates growth options in the second stage of a two-stage valuation model for the firm.

In August 2005, an investment manager of a hedge fund is considering purchasing an equity interest in a start-up biotechnology firm, Arcadian Microarray Technologies, Inc. The asking price is $40 million for a 60 percent equity interest. Managers of the firm are optimistic about the firm's future performance; the investment manager is more conservative in his expectations. He calls on the help of an analyst with her firm to fashion a counterproposal to Arcadian's management. The tasks for the student are to apply the concept of terminal value, interpret completed analyses and data, and derive implications of different terminal-value assumptions in an effort to recommend a counterproposal. Very little numerical figure-work is required of the student.

Teuer Furniture is a privately owned, moderately sized chain of upscale home furnishing showrooms in the United States. The firm survived the economic recession and by the end of 2012, it has regained its financial footing. Now that the firm is more secure financially, some of its long-term investors have asked to cash out their investments. This will be the first time that Teuer has repurchased its equity; the company has paid dividends since 2009. Chief financial officer Jennifer Jerabek and her team have been given the task of valuing Teuer using a discounted cash flow approach. The discount rate is given in the case, and the students need to build a pro forma income statement, balance sheet, and cash flow statement and then calculate a per-share value for Teuer. Estimate firm value using a discounted cash flow approach Construct firm-level estimates of the pro forma income statement, balance sheet, and cash flow from assets based on store-level estimates Recognize how forecasts of revenues, costs, and capital investment are constructed, how the individual estimates relate to each other, and how the forecasts depend upon the underlying economics of the business Evaluate and defend the validity of the firm’s forecasts and the valuation model

Purpose In contrast to earlier studies, the most recent studies on the incremental value relevance of earnings and cash flows from operations find that both earnings and cash flows have incremental value relevance beyond each other. An interesting question that follows is whether these findings hold after controlling the extremity of earnings and cash flows. This study, therefore, aims to examine the incremental value relevance of earnings and cash flows in the following four cases: moderate earnings and moderate cash flows, moderate earnings and extreme cash flows, extreme earnings and moderate cash flows and extreme earnings and extreme cash flows. Design/methodology/approach To evaluate the incremental value relevance (information content) of earnings and cash flows for each of the four cases mentioned above, we examine the statistical significance of the slope coefficients for regression of returns on both unexpected earnings and unexpected cash flows from operations. Findings The results show that (i) both moderate and extreme earnings have incremental value relevance beyond both moderate and extreme cash flows, (ii) moderate cash flows have incremental value relevance beyond both moderate and extreme earnings and (iii) extreme cash flows lack incremental value relevance beyond moderate earnings; however, they (extreme cash flows) have incremental value relevance beyond extreme earnings. These results suggest that earnings and cash flows have incremental value relevance. However, only in cases when cash flows are extreme and earnings are moderate, cash flows do not possess incremental value relevance. In further analysis, we find that the value relevance for cash flows and earnings decreases when they are extreme and transitory. Moreover, the value relevance for cash flows increases when they are moderate (not extreme) and the other competing measure (earnings) is transitory and extreme. Practical implications The results support the idea that earnings and cash flows from operations complement each other in explaining variation in returns. However, when cash flows are extreme and less informative, investors rely more on earnings in firm valuation, especially when earnings are moderate. Because earnings are unlikely to persist to be permanent across the years, these results can be interpreted as indicating that cash flows and earnings information are used jointly by investors. Originality/value In contrast to previous studies, we control for the extremity of earnings and cash flows when evaluating the incremental value relevance of earnings and cash flows from operations.

Purpose – Two stylized facts emerge from cash flow literature. One explores the link between free cash flow (FCF) to firm value (Jensen, 1986) and establishes that FCF increases firm value. The other posits FCF may be value decreasing as firms tend to over invest when there is high level of FCF (Richardson, 2006). Two camps have opposing views yet together they establish that FCF is value relevant. If FCF or cash flow, in general, is value relevant then managers will be motivated to present forecasts to investors. The paper aims to discuss these issues. Design/methodology/approach – The authors hand collect data from each firm’s press releases and earnings announcements and perform an event study around this date to see how firm forecast and disclosure policies affect firm value. Findings – The analysis demonstrates that disclosures and forecasts do have significantly positive relation with tech firms suggesting that firms in the technology industries are more forthcoming with cash flow disclosures and forecasts in their earnings announcements. The authors further show that these disclosures and forecasts negatively affect the firm value of tech firms. Originality/value – This paper contributes to the literature that there is empirical evidence that cash flow disclosures and forecasts matter to the value of the firm. Further, it posits that unlike understanding the existing views as opposing each other, may be the authors will be better served if they view both of them as right depending on the optimality of forecasts. The future efforts will be directed toward exploring the optimality of cash flow disclosures.

Purpose – The main objective of this paper is to compare the ability of US-generally accepted accounting principles (GAAP) operating cash flows versus Iran-GAAP operating cash flows in predicting future cash flows. Design/methodology/approach – The sample comprises 240 firms (1,200 firm-years) during the period from 2004 to 2008 for which operating cash flows and other variables are available. Cross-sectional and panel data regression models are used in testing the hypotheses. Findings – This study finds that operating cash flows based on Iran-GAAP are no more effective in predicting future cash flows than those based on USA-GAAP, and the predictive ability of the model is improved by adding the earnings accrual components to the operating cash flows. Originality/value – The study suggests that the Iranian accounting standard setting committee recommends that the statement of cash flows be prepared based on the three-category model instead of the five-category model in an attempt to converge with the International Financial Reporting Standards. Consistent with Financial Accounting Standards Board and financial analyst recommendations, the results reveal that earnings are a better predictor than cash flows from operations.

Purpose – The purpose of this paper is to examine how investors’ valuation of cash holdings is related to firm-level investment. Design/methodology/approach – As prior studies note that holding excess cash serve as a driver to would be over-investing, and that over-investment imposes substantial agency costs on shareholders, the authors focus on the value implications of holding cash in the presence of over-investment from the perspective of shareholders. Findings – By examining the publicly traded companies on Taiwan stock market, the authors uncover that cash is valued less in firms with over-investment than in those with under-investment and the magnitude of over-investment is negatively related to the marginal value of cash holdings (MVCH). It reveals that investment activities impact the value that shareholders place on cash holdings. Moreover, further tests indicate that higher block holdings and the presence of independent directors on boards can effectively mitigate the negative impact of over-investment on the MVCH. Practical implications – This paper enhances the understanding of the valuation implications of cash reserves held by firms with over-investment and the effectiveness of governance structures in containing the detrimental effect of investment-related agency costs on the value of holding cash. Originality/value – This paper provides pioneering evidence that outside investors discount cash assets in over-investing firms to reflect their expectations that they will not receive the full benefit of these assets; and this paper extends the literature on corporate governance by assessing the role of governance mechanisms in reversing the negative relation between over-investment and the MVCH.

Purpose – The purpose of this paper is to establish whether a terminal value is a substantial amount of the final figure in a hotel’s valuation. Malta’s scenario has been delved into. This due to the fact that owing to Malta’s high population density and its restrictive land area, land values attract a high premium as compared with larger developed countries. Other matters such as earnings’ multipliers derived from a cap rate (initial yield), CAPEX has also been delved into. Design/methodology/approach – The methodologies adopted in hotel valuation practice has been delved into. An extensive literature review is undertaken to analyse the earnings multiplier adopted by various authors over the past 30-year period. The hotel cap rate (initial yield) has been compared with similar yields adopted in the institutional and property markets and then compares to market-based data. A discussion is undertaken on the validity of adopting discounted cash flow, as against the short cut market appraisal approach. Capitalization rates, cap rates have also been referred to as obtained from the academic and practitioners field and compared. Depreciation and the anticipated annual accommodation charges have been analysed. A database of hotel rooms value over the past 20-year period has been referred. Findings – A table outlines the earnings’ multipliers in perpetuity or for the limited expected design life for various cap rates. This data will act as a guide in guiding practitioners to establish an earnings’ multiplier to be applied in their valuation methodology. An example in the Appendix clarifies the manner in which this data table is to be utilized. The finding of this example notes that for this hotel in Malta, as constructed on private land, the terminal value for this development hovers around the 30 per cent of the market value. Research limitations/implications – This analysis is based on five valuations as undertaken on five hotels in Malta with classification grades varying from III to V. This notes that the terminal value varies within a range of 9-45 per cent of the total value. This analysis has to be undertaken for other countries for a global range of land terminal values percentages to be established. Practical implications – Establishing the terminal value of a hotel business, will offer greater security for secured lending facilities required. It will further act as an important tool to establish the feasibility of a hotel development. Originality/value – Updated insight is given to existing hotel valuation methodologies by delving into the workings of the earnings’ multiplier and establishes that in today’s market the terminal value of the hotel basis has to be accounted for. The above findings are based on a link between theory and practice.

Purpose – The purpose of this paper is to investigate the relationship between firm value and cash holdings for the period 2003-2008. This study seeks to find if there are costs and benefits associated with holding too much or too little cash, then an optimal cash level exists where marginal benefits are offset by their costs. If this optimal point exists, then firm value will be maximized at that point and deviation from it will affect the firm value negatively. Design/methodology/approach – Optimal cash level between firm value and cash holding is determined by investigating the concave relationship. If concave relationship exists then a residual term is included in the equation to see how deviations from the optimal level affect firm value. A two-step generalized method of moments (GMM) estimator is used in estimating all results. GMM controls for unobserved firm heterogeneity and endogeneity problems. Findings – Results showed that a concave relationship exists between firm value and cash holdings, which confirmed that there is an optimal cash level that maximizes firm value. It was also found that deviations from the optimal level affect firm value negatively. Practical implications – The paper provides the existence of an optimal point of cash between costs and benefits wherein firm value is maximized. It has implications for firms’ investment and financing decisions when there is limited access to external finance. At higher level of cash the study has implications for agency theory and governance practices. Originality/value – The study establishes a conclusive relationship between firm value and cash holdings within the context of the Pakistani market.

Purpose – The purpose of this paper is to find an effective numerical method for solving singularly perturbed convection-diffusion problems. Design/methodology/approach – The present method is based on the asymptotic expansion method and the variational iteration method (VIM). First a zeroth order asymptotic expansion for the solution of the given singularly perturbed convection-diffusion problem is constructed. Then the reduced terminal value problem is solved by using the VIM. Findings – Two numerical examples are introduced to show the validity of the present method. Obtained numerical results show that the present method can provide very accurate analytical approximate solutions not only in the boundary layer, but also away from the layer. Originality/value – The combination of the asymptotic expansion method and the VIM is applied to singularly perturbed convection-diffusion problems.

Purpose – The purpose of this paper is to examine the effect of financial constraints on firm growth considering six types of ownership structure. According to the theory of financial management and asymmetric information theory, external funds are costly for small firms. However, some ownership structures may alleviate cash flow-growth sensitivity. The paper considers different types of ownership structure to study cash flow-growth relation and its sensitivity. Design/methodology/approach – Results are drawn from a dynamic panel data model under the two specific empirical models. Those designs can capture important empirical meanings. Findings – The sensitivity of growth to cash flow decreases significantly when managers control larger proportions of a firm's stock and when a firm belongs to a conglomerate. The findings also show that small and young firms grow faster. R&D and advertising expenditures also motivate a firm's growth, as do profitability and abundant cash flow. Originality/value – This paper uses a dynamic panel data model to investigate the effect of cash flow on firms' growth under six types of ownership structure. The sensitivity analysis of growth to cash flow provides new results for traditional literature. In fact, different ownership structures lead to distinct cash flow-growth sensitivity.

Purpose – The purpose of this paper is to investigate the accuracy and informational quality of the cash from operations section of the cash flow statement. Design/methodology/approach – This paper empirically tested the accuracy of the cash from operations reported by Canadian non-financial companies. The authors studied 262 companies at three different time periods providing 786 firm observations. For each observation, the balance sheet was used to confirm the figures reported in the statement of cash flows. In addition, the authors investigated management's disclosure of the particular working capital items. Findings – The findings suggest that in recent years, companies are more likely to overstate their cash flow from operations, thereby presenting a better financial picture than is supported by the balance sheet accounts. This would suggest that the investing or financing section would be correspondingly understated. The presence of acquisitions reduces overstatements, which may be the result of more auditor presence. Research limitations/implications – This paper extends previous research from documented single, isolated instances of cash from operations being misstated to include a significant sample with more generalizable findings. The data are Canadian which may limit the generalizability to other countries. Future research should address the extent to which financial analysts rely on the reported cash from operations figure. Practical implications – This preliminary study may have implications for financial analysts and others relying on the free cash flow figure. Originality/value – This study expands on previous research which has taken place only on a case-by-case basis.

PurposeThere are three approaches to valuation: cost, market and income. As a subset to the income approach, the investment method looks at the pricing of assets that produce income over an investment holding period. The discounted cash flow (DCF) technique or model can be developed to look at the cash flows on a quarterly basis to reflect the actual receipt of the cash flows. This Education Briefing is a overview of the DCF quarterly model and the need to analyse comparables appropriately. The paper aims to discuss these issue.Design/methodology/approachThe DCF quarterly model can be seen to produce estimates of market value.FindingsAs the use of DCF is developed and expanded, it is useful to be able to model the cash flows appropriately.Practical implicationsThe old adage “value as you analyse” applies to DCF valuations. If valuing quarterly, then the analysis needs to be done on the same basis.Originality/valueThis briefing is an overview of the pricing of freehold rack rented properties in the UK.

PurposeThe purpose of the paper is to investigate the relation between the value/growth anomaly and the external financing anomaly by considering an expanded value/growth indicator: free cash flow yield (free cash flows scaled by price).Design/methodology/approachThe paper utilizes portfolio‐level tests and cross‐sectional regressions.FindingsIn line with the literature on contrarian portfolios, this paper finds that firms with low (high) free cash flow yield are experiencing low (high) returns. However, only when an investor buys (sells) stocks of firms with high (low) free cash flow yield that distribute (raise) capital, his zero‐cost portfolio is significant. These findings are robust, irrespective of the financing vehicle (equity or debt). Overall, their evidence suggests that distinctions between the value/growth anomaly and the external financing anomaly partially disappear, if one is willing to employ free cash flow yield as a proxy of the former anomaly.Originality/valueThe paper enhances one's understanding of the relation between asset pricing anomalies.

PurposeThere are three approaches to valuation: cost, market and income. As a subset to the income approach, the investment method looks at the pricing of assets that produce income over an investment holding period. The discounted cash flow (DCF) technique or model can be developed to look at the cash flows on a quarterly basis to reflect the actual receipt of the cash flows. The aim of this paper is to give an overview of the DCF quarterly model.Design/methodology/approachThis education briefing is an overview of the DCF quarterly model.FindingsThe DCF quarterly model can be seen to produce estimates of market value.Practical implicationsAs the use of DCF is developed and expanded, it is useful to be able to model the cash flows appropriately.Originality/valueThis is a review of existing models.

PurposeThe purpose of this paper is to examine the determinants of analysts' operating cash flow forecasts of Australian listed firms and whether or not such forecasts improve the usefulness of earnings and predictive ability of current cash flows.Design/methodology/approachThe authors used a large sample of firms for which both cash flows and earnings forecasts were available over a period between 1993 and 2003, and employed both univariate and logistic regression analyses.FindingsIt was found that analysts forecast both operating cash flows and earnings when the firms are more complex in operations and when the size of the firm is relatively small. Further, it was found that cash flow forecasts improve the usefulness of earnings and predictive ability of current cash flows.Originality/valueThis study contributes to current understanding of analysts' forecast behaviour regarding dissemination of operating cash flow information and usefulness of cash flow forecasts.

PurposeThe purpose of this paper is to examine the impact of the two diversification strategies on firms' propensity to save cash out of cash flow.Design/methodology/approachThe author examines the quarterly data of Compustat's active and research firms from the first quarter of 1999 to the last quarter of 2005, with a sample size of more than 79,000 firm quarters. A two‐step GMM Instrumental Variable regression of change in cash holdings, on variables that measure the degree of industrial as well as international diversification strategies, is employed to investigate whether each diversification strategy alleviates or exacerbates firm's propensity to save cash out of its cash flows.FindingsEvidence is found that industrial diversification mitigates the propensity of firms to save cash out of their cash flows. When the sample is partitioned into financially constrained and financially non‐constrained firms, industrial diversification reduces propensity of firms to save cash out of cash flows for financially constrained firms but not for financially non‐constrained firms. On the other hand, the results do not indicate any impact of international diversification on the sensitivity of cash to cash flows.Originality/valueThe paper tests, empirically, whether international and industrial diversification strategies affect the propensity of firms to save cash out of their cash flow.

PurposeThe purpose of this paper is to examine the comparative abilities of current period cash flows and earnings (and its components) to predict one‐year‐ahead cash flow from operations in Egypt.Design/methodology/approachThe study uses the cash flow prediction models developed by Barth, Cram, and Nelson to examine the predictive abilities of earnings and cash flows for future cash flows. The first set of prediction models uses cross‐sectional regression to compare the predictive abilities of cash flows and aggregate earnings for one‐year‐ahead cash flow from operations. The second set of prediction models tests whether disaggregating earnings into cash flows and the major components of accruals enhances the predictive ability of earnings for one‐year‐ahead cash flow from operations.FindingsThe findings of the study reveal that aggregate earnings have superior predictive ability than cash flows for future cash flows. Also, the results reveal that disaggregating accruals into major components – changes in accounts receivable and payable, and in inventory, depreciation, amortization, and other accruals – significantly enhances predictive ability of earnings.Research limitations/implicationsThe study provides empirical evidence on the superiority of earnings in predicting future cash flows. The findings of the study should be considered in explaining the results of value relevance research Egypt. However, owing to relatively small sample size, given the thinness of the Egyptian capital market, these findings should be interpreted with caution.Originality/valueThe paper contributes to the limited body of research on the superiority of earnings and cash flows in predicting future cash flows by examining the predictive abilities of earnings and cash flows for future cash flows in Egypt as one of many emerging markets.

PurposeThis paper sets out to look at “calculation of worth” as it relates to valuations.Design/methodology/approachA number of pricing models and valuation methods are analysed. Forecasting is also considered.FindingsIt is possible to adapt the discounted cash flow (DCF) method to incorporate subjective predicted growth rates. In the case of a rack‐rented freehold, the DCF method produces the same value as the traditional method.Originality/valueThis paper looks at “testing the assumptions”.

This study evaluates the success of the monthly withdrawal of funds from hypothetical retirement portfolios for the period January 1930 to December 2001. The objective of this research is to provide an empirical examination of the historical effect of global diversification on the withdrawal of funds from a retirement portfolio. We compare portfolios consisting of U.S. stocks and U.S. corporate bonds, and portfolios consisting of global stocks and U.S. corporate bonds. We examine both portfolio compositions using a variety of portfolio weights, fund withdrawal rates, and fund withdrawal periods. The results of the study indicate that, in general, portfolios with a higher equity portion had a greater likelihood of sustaining a given number of withdrawals over this time. Additionally, for much of the 1930 to 2001 period, including international stocks in a withdrawal portfolio decreased the likelihood the withdrawals lasted for a given period. However, the inclusion of international stocks does increase the terminal value of retirement portfolios after withdrawals during the latter part of the period under study. The results of this study can be used for retirement planning since it provides a historical perspective on the success of various withdrawal rates. The results can also be used to determine the value of the portfolio an individual needs at retirement to fund a given level of withdrawals. This can assist in the retirement timing decision.

Purpose of the paperThis research paper has two objectives. The first is to shed light on the consistency in and quality of the applied valuation models. The second objective is to analyse uniformity on important valuation input variables throughout 1994‐2002.Design/methodology/approachMore than 150 original valuation reports are retrieved and qualitatively checked on model consistency, for example on discounting methods. The impact of the inconsistencies on the end value were calculated by using a dummy discounted cash flow model (DCF). The uniformity of the input variables net yield, discount rate and exit yield are quantitatively determined: is there a decreasing standard deviation through time?FindingsThere appears to be little consistency: the Dutch appraisers use a variety of methods within the DCF method. Cash flows are discounted quarterly in advance, yearly in arrear and averaged over the year, only three of the ten most frequent used appraisers use a flexible inflation scenario, etc. These different approaches can have a large impact on the appraisal value. As for the uniformity, the standard deviation for all three variables has not decreased through time.Practical implicationsThe conclusions and recommendations of this research have been used by the valuation committee of the ROZ/IPD Netherlands Property Index to improve and extend the valuation guidelines.Originality/valueValuation models, which are the foundation of benchmarks, have never been researched on a large scale due to confidential issues. This research appears to be the first to actually analyse valuation models of many different appraisal companies in one country, The Netherlands. The participants of the ROZ/IPD Netherlands Property Index own 85 per cent of the €38 billion institutionally invested value in real estate in The Netherlands. Their policy decisions are partially based on the comparison to the Dutch benchmark. Therefore consistency and uniformity of the valuation models is critical.

PurposeThis research furthers scholarly discourse which discusses the most effective way(s) to calculate investment returns under conditions of continuous and/or discrete cash flows with continuous and/or discrete discounting.Design/methodology/approachDiscusses Pogue's work on the methods for investment analysis.FindingsPogue's article of discrete versus continuous calculation of investment returns discusses limitations of the traditional assumption that cash flows in investment appraisal occur at the end of each period and points to a more realistic assumption that cash flows occur on a continuous basis. Pogue then proposes a formula for managers to use when calculating investment returns. Finds that Pogue's suggested method of calculation is neither supported by prior literature nor sound in its implications.Originality/valueProvides further analysis of discrete and continuous discounting models in investment decisions.

This study examines the effects of the accruals vs. cash flow bases on firm’s MB ratio as a proxy for shareholder value. The methodology utilizes the benefits of the ‘partial adjustment model’ where it addresses the extent to which the shareholder value adjusts to a target level. The final results indicate that (a) the accrual basis helps adjust the shareholder value to a target level more than the cash flow basis, (b) the shareholder value is associated with profitability‐related ratios and dividend‐related ratios, (c) in both bases, the shareholders value is positively associated with earnings per share and price‐to‐earnings ratio, (d) the significant effects of firm‐specific controls indicate that the shareholder value is affected by the accounting base in certain industries, certain size, and affected by the time as well. The results of the sensitivity analysis show that the accruals‐based estimates and cash flow estimates are robust and reliable.

In this article, modifications are suggested for the current format of the cash flow statement, which is prescribed by AC 118, in order to address ambiguities and improve comparability. This redefinition of activities, together with the alteration of the layout, leads to a better explanation of the cash‐generating function of an enterprise. The authors argue that the separation of the cash flow for the maintenance of the existing resource base and the cash flow for the expansion thereof, is essential information in a model for the prediction of the future cash flow generation of a company. The resultant increase in the accessibility, reliability and utility of cash flow reporting should enhance users’ economic decision making and liberalise financial information. The modifications proposed in the article can therefore assist standard setters to improve financial reporting.

This paper examines the measure of compensation payable for electricity wayleaves through afforestation and considers the merits of using a discounted cash flow approach to calculate the level of compensation. The research finds that the majority of negotiations take place “under the shadow” of compulsory powers and that the measure of compensation is based on the principle of equivalence; the compensation payable being the loss to the landowner and not the gain to the electricity supply company. It concludes that great caution is needed when applying a discounted cash flow approach to the valuation of afforestation owing to the large number of inputs and the sensitivity of the estimated land value to changes to key variables such as the discount rate and tree species.

Looks at the philosophy of valuation, explaining the distinction between “worth” and “price”. Attempts to explain traditional techniques of assessing price. Looks at the development of discounted cash flow and its applications in valuations and calculations of worth. Concludes that there must be more openness with clients about valuation risks and issues so that they can make informed judgements.

Presents an educational model that has been developed to evaluate investments in small hospitality operations. Developed in the context of small businesses in Turkey, the model presents a systematic approach to evaluating the feasibility of small bed and breakfast hotel investments. Evaluates investment alternatives using discounted cash flow techniques as the user enters inputs with respect to the variables influencing the net cash flows. Observes changes in the value of the investment as any of the input variables are changed or as new scenarios are developed. Believes that such an approach is expected to increase understanding of investment analysis and contribute to education and decision process of small investors who usually lack the means for formal feasibility studies.

This paper presents an alternative approach to the usual method of computing expected values of cash flows in capital budgeting situations. The approach is based on the more realistic notion that the cash flows, the probabilities assigned to the cash flows, or both are not always exactly known. Three cases representing different types of uncertainties relating to the cash flow prospects are presented and expected values are derived using the fuzzy set theory. The approach utilized in this paper provides an alternative to the prevalent methodology of estimating cash flows in capital budgeting. This approach offers greater flexibility in dealing with the complex issue of uncertainty than the prevalent probability‐based approach in cases where decisions are complex enough so that neither cash flows nor probability distributions are totally available.

Recent globalization of markets has led to corporate activities that span numerous national boundaries within a single multinational corporation. We address the particular problem of cash flow management in a multinational setting. Uncertainty regarding changes in exchange rates, differences between currency bid and ask prices, possibly unknown changes in both lending and borrowing rates, and uncertain cash flows from subsidiaries make this problem difficult to specify in a traditional crisp environment. In this paper, we show how fuzzy programming techniques can be employed to handle the general problem of multinational cash flow netting. We also provide a specific numerical example comparing the results of the crisp and fuzzy contexts with the aid of sensitivity analysis.

Discusses some problems associated with people using computer packages who are unwilling or unable to understand how to run the system, its limitations, the techniques employed and the end results. Explains a model of discounted cash flow.

This paper examines the extent to which discounted cash flow methods — the theoretically preferred capital investment appraisal approach — are used in the evaluation of capital projects within the United Kingdom.

The mathematics of property valuations commonly used in practice exist in several formulations which have been adopted over the years. All are similar in that they represent simple discounted cash flow models equating the estimated future earnings capacity of a property to a net present (capital) value. The process, whilst appearing somewhat daunting, is in fact accomplished in a manner such that, under normal circumstances, the estimated future cash flow beyond the next rent review is not explicitly expressed. Instead of generating a future income flow (assuming some rate of rental growth) and discounting at a money rate of interest (suitably adjusted for risk), the estimated rental income at the next review is capitalised at a relatively low investment yield rate which merely implies a future rental growth rate.

Discounted cash flow (DCF), whether by capitalisation or by cash flow analysis, has many detractors because of a number of apparent problems such as the reinvestment assumption and the possibility of multiple rates of return. The capital recovery cum reinvestment aspects of Years' Purchase (YP) factors and DCF are discussed and it is demonstrated that Years' Purchase single rate principle is akin to Internal Rate of Return (IRR) and that Years' Purchase dual rate principle also has a DCF image known as the Modified Internal Rate of Return (MIRR). The difference between the YP models and the DCF models is to do with the level cash flows assumed in the former and the variability of the cash flows measured in the latter. MIRR was developed as an answer to the above problems and it is demonstrated in a case study in which the fallacy of the apparent problems is also demonstrated. MIRR has a place in the analysis of investment strategy, but IRR (equated yield) is shown to be satisfactory in the financial analysis and comparison of individual projects.

Life Cycle Costing (LCC) offers many advantages over other techniques but the time‐span over which the study must be undertaken and the uncertainty involved probably detract from its usefulness. However, this is one area where Discounted Cash Flow (DCF) techniques have great scope for application. The most important influences on decision making, in practice, are consistency and feedback; the challenge remains to prevent organisational decision making being resistant to new ideas and techniques.

This paper synthesises the mortgage‐equity capitalisation technique, often used in property investment analysis and valuation practice in the United States of America, and the equated yield technique used in the United Kingdom. The mortgate‐equity technique considers two components of value, namely, debt and equity. It is usually applied to the nett income receivable in the first year, (conventional income capitalisation). Equated yield is a form of cash flow analysis which allows for the assessment of rental income projections. The combination of the two techniques, where debt capital is treated as an actual series of cash flows, leads to a discounted cash flow rate of return being available for equity capital. This measure should be of interest to property companies and occupying investors. The approach is demonstrated using a simple example, and some sample tables of equated yield on equity are appended.

With growing redundancies and short‐time working in many sectors of British industry, the struggle to survive—and in some cases, to avoid Government intervention—has centred around the problem of cash flow. Maintaining liquidity has become the major task on hand—although few would admit to being in difficulty. To do so would be to invite creditors to press their claims even harder at a time when payment terms are being extended to their limit. Putting on an act is all part of the gamesmanship of cash management.