A series of inward and outward cash flows over time in which there is more than one change in the cash flow direction. This contrasts with a conventional cash flow, where there is only one change in cash flow direction. In terms of mathematical notation - where the - sign represents an outflow and + denotes an inflow - an unconventional cash flow would appear as -, +, +, +, -, + or alternatively +, -, -, +, -.

The term is particularly used in discounted cash flow (DCF) analysis. An unconventional cash flow is more difficult to handle in DCF analysis than conventional cash flow since it may have multiple internal rates of return (IRR), depending on the number of changes in cash flow direction.

In real-life situations, examples of unconventional cash flows are abundant, especially in large projects where periodic maintenance may involve huge outlays of capital. For example, a large thermal power generation project where cash flows are being projected over a 25-year period may have cash outflows for the first three years during the construction phase, inflows from years four to 15, an outflow in year 16 for scheduled maintenance, followed by inflows until year 25.

Normal cash flow comprises of initial investment outlay with net positive cash flow all through the time of the project. It is also called conventional cash flow stream.

An unconventional cash flow comprises of inward and outward cash flows over time in which the direction of the cash flow changes frequently, unlike conventional cash flow, where a change in direction of the cash flow happens only once.

Conventional cash flow shows a single cash flow direction of a company. Organizational structures. Normally, cash outflows happens just once which is at the start of a project. All cash flows are inflows onwards. The outflow at the start is to fund the project.

What is the difference between normal and non-normal cash flow streams? Normal cash flow stream – Several positive cash inflows follow Cost (negative CF). ... Non-normal cash flow stream – Frequent changes of signs. Most common: Cost (negative CF), then string of positive CFs, then cost to close project.

Generally, a profitability index more than 1 represents a positive NPV. A profitability index less than 1 represents a negative NPV. For example, a project that costs $1 million with a present value of future cash flows of $1.2 million has a PI of 1.2.

Greater than 1.0 – is preferred by investors, creditors, and analysts, because it implies a company can cover its liabilities for now and still have spill over. Companies with a high or uptrending operating cash flow are doing well financially.

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Normal cash flow comprises of initial investment outlay with net positive cash flow all through the time of the project. It is also called conventional cash flow stream.

An unconventional cash flow comprises of inward and outward cash flows over time in which the direction of the cash flow changes frequently, unlike conventional cash flow, where a change in direction of the cash flow happens only once.

Conventional cash flow shows a single cash flow direction of a company. Organizational structures. Normally, cash outflows happens just once which is at the start of a project. All cash flows are inflows onwards. The outflow at the start is to fund the project.

What is the difference between normal and non-normal cash flow streams? Normal cash flow stream – Several positive cash inflows follow Cost (negative CF). ... Non-normal cash flow stream – Frequent changes of signs. Most common: Cost (negative CF), then string of positive CFs, then cost to close project.

Generally, a profitability index more than 1 represents a positive NPV. A profitability index less than 1 represents a negative NPV. For example, a project that costs $1 million with a present value of future cash flows of $1.2 million has a PI of 1.2.

Greater than 1.0 – is preferred by investors, creditors, and analysts, because it implies a company can cover its liabilities for now and still have spill over. Companies with a high or uptrending operating cash flow are doing well financially.

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