An incremental cash flow is said to be the additional cash flow for operations that an organization incurs when implementing a new project. If the incremental cash flow is said to be positive, it is stated that the organization will have an increased cash flow when the project is accepted (Brooks, 2015). Several concepts need to be considered when taking a look at the incremental cash flow. The concepts include; the initial outlay, this is the initial amount that is used to start the project. Another concept that should be considered is the cash flows from the project that is being run. This is the way that the cash flows while the project is being undertaken. If the incremental flow is positive, it means that there is an increased cash flow. Another concept that should be considered is the terminal value or cost, and this is the cost that will be incurred if the project is terminated or when the project is over (Nallareddy, Sethuraman & Venkatachalam, 2017). The organization also looks at the timing and the scope of the new project when looking at the incremental cash flow of a project. All these concepts need to be considered when the incremental cash flow is being looked at. The incremental cash flow takes a look at all the cash inflows and cash outflows from a project that is being undertaken by a particular organization. The concepts should ensure that there is a positive cash flow return. The relevance of the project also needs to be considered in selecting a project. The project should be easier to run and the necessary resources to run the project should also be available. The project should present a positive incremental cash flow.
References :
Brooks, R. (2015). Financial management: core concepts . Pearson.
Nallareddy, S., Sethuraman, M., & Venkatachalam, M. (2017). The changing landscape of accrual accounting: Implications for operating cash flow predictability.
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