Non-Normal Cash Flow

Non-normal cash flow stream (also called unconventional cash flow) is a pattern of cash flows in which the direction of cash flows changes more than once. It is also termed as unconventional cash flow.

Non-normal cash flow stream leads to what is called multiple-IRR problem.

Example

Alpha Beta is analyzing cash flows stream of Project Gamma which is given below:

YearGamma
0(550,000)
11,000,000
2(900,000)
31,500,000

The project has non-normal cash flow stream because cash flows change direction thrice (in Year 1, 2 & 3).

by Obaidullah Jan, ACA, CFA and last modified on

XPLAIND.com is a free educational website; of students, by students, and for students. You are welcome to learn a range of topics from accounting, economics, finance and more. We hope you like the work that has been done, and if you have any suggestions, your feedback is highly valuable. Let's connect!

Copyright © 2010-2024 XPLAIND.com