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CASH FLOW CASH FLOW TYPES OF MARKET STRUCTURE

There are two types of cash flows: the flow of the project without funding (also called the flow of the "pure") and the flow financing (also known as flux or flow of the project financed by the investor).

In the flow of the project without funding, it is assumed that the investment required for the project funding comes from internal sources (own), ie that the total resources needed from the project executing agency or the investor.

funded in the flow, it is assumed that the resources used by the project are in part owned and part of third persons (natural or legal) ie that the project uses external resources for funding.

PROJECT PURE FLOW

flow recorded in the taxable income including income from sales, services and investments of temporary excess cash. Of this income, deductible expenses are subtracted, which are operating, maintenance, management, marketing, sales, excise taxes, and depreciation. Upon completion of this process gives the net taxable income, which is the basis for the calculation of taxes attributable to the project.

The result of subtracting the taxable net direct taxes add the gain from the sale of assets, income taxes take extraordinary and non-deductible costs and add non-taxable income (sale of assets by book value and subsidies, mainly) could be called the "net."

This net income, depreciation must be added, since it represents a cash disbursement of the project and subtract the costs of investment (fixed assets and nominal, pre expenses - operating and working capital). We also have to adjust for other costs not deductible or taxable income. This is the end-result: the flow of funds from the project (without funding).

FUNDED PROJECT FLOW

This flow differs from the earlier to the extent that they consider the sources of project financing. Therefore, revenues are recorded by the receipt of principal on loans and credits (income is not taxable, being an account of the Balance Sheet). Also include the costs of debt servicing in the flow: the interest and fees are deductible operating costs and depreciation are not deductible disbursements.

BASIC OUTLINE OF A CASH FLOW

CASH FLOW AND INVESTMENT DECISIONS

As described, the cash flows used in the financial evaluation of projects to synthesize the data generated in studies that are part of the formulation and preparation of a project.

However, we must not forget that this whole procedure is followed in order to summarize this information in a selection criterion.

From this point of view, the information recorded in the flow must be studied in order to reflect the positive and negative impacts that are actually attributable to the project and which had not been incurred if the project been carried out. That is why the decision whether or not a project takes only with regard to so-called "incremental cash flow."

This flow is formed only from the revenues and costs attributable to the project, which is where it had not been incurred if the project had not executed.

REFERENCES 1. Nassir Sapag Chain, Reinaldo Sapag Chain, "Preparation and Evaluation", Fourth Edition
2. Ernesto R. Fontaine, "Social Evaluation of Projects", 12 th Edition
3. Karen Marie Mokate, "Financial Evaluation of Investment Projects", First Edition.