Estimating the Cash Flows to the Economic Entities in Romania

Abstract

This article tries to demonstrate that the most important stage in drafting a draft budget for aninvestment is the estimation of cash flows. If the cash flow estimate does not have a reasonabledegree of accuracy, any analytical technique, irrespective of its complexity, can lead to mistakendecisions and hence to operating losses and market price cuts. This does not mean that economicentities are not allowed to make estimation errors, but only that the estimation of cash flows mustbe the best possible when evaluating a project. Therefore, describing the importance of accuratelyestimating cash flows is rather difficult, but observing some basic principles will help minimizeforecast errors. The article ends with the author’s conclusions on estimating cash flows for aninvestment budget.

Keywords

• analysis
• budget
• estimation
• cash flow
• project