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Managing a Firm's Cash Flow Recovery Strategy

Managing a Firm's Cash Flow Recovery Strategy

Aditya Vikram Rajkumar, Jeffrey Williams
Copyright: © 2012 |Volume: 3 |Issue: 1 |Pages: 21
ISSN: 1947-8569|EISSN: 1947-8577|EISBN13: 9781466614253|DOI: 10.4018/ijsds.2012010102
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MLA

Rajkumar, Aditya Vikram, and Jeffrey Williams. "Managing a Firm's Cash Flow Recovery Strategy." IJSDS vol.3, no.1 2012: pp.60-80. http://doi.org/10.4018/ijsds.2012010102

APA

Rajkumar, A. V. & Williams, J. (2012). Managing a Firm's Cash Flow Recovery Strategy. International Journal of Strategic Decision Sciences (IJSDS), 3(1), 60-80. http://doi.org/10.4018/ijsds.2012010102

Chicago

Rajkumar, Aditya Vikram, and Jeffrey Williams. "Managing a Firm's Cash Flow Recovery Strategy," International Journal of Strategic Decision Sciences (IJSDS) 3, no.1: 60-80. http://doi.org/10.4018/ijsds.2012010102

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Abstract

Traditional cash flow estimation techniques focus on generating net cash flow estimates period-by-period, which are then discounted by the firm’s cost of capital. While conceptually strong, this aggregation approach can be insensitive to the fine-grained detail so important to managing project cash flows, in particular, that investment returns are always a combination of growth (renewal) and decline (convergence) forces at work over the firm's life. As is demonstrated in this paper, the aggregation problem can be addressed by employing a cash flow recovery period (CFRP) framework, which distinguishes and quantifies the renewal and convergence forces unique to each firm's project cash flows. The benefit of this more fine-grained approach is that it provides an additional level of detail that can be used to manage firm returns.

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