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Difference between real and nominal cash flow is that nominal cash flows uses the inflation information as well for calculation of nominal cash flow of future while real cash flow don't use that information for calculation.

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Can TVM be used to evaluate the real return or just the nominal return?

TVM, or Time Value of Money can certainly be used to calculate a real return. The only difference between a nominal return and a real return is inflation, so simply discount your future cash flows by anticipated inflation and you have a real return. In simpler terms assuming inflation is steady you could simply deduct inflation from your nominal return. For example a nominal 7% return with 3% inflation could be desribed as a 4% real return.


The GDP gap measures the difference between?

nominal GDP and real GDP.


What is the purpose of cash notes?

Cash flow notes ensure that one who borrows will repay the amount that one has taken. Cash flow notes are typically used in business, factoring, structured settlements, and real estate.


Why are we interested in Cash flow rather than accounting profits in determining the value of assets?

We focus on cash flow rather than accounting profits when determining the value of assets because cash flow provides a clearer picture of a company's actual financial health and liquidity. Unlike accounting profits, which can be influenced by non-cash items like depreciation and accounting policies, cash flow reflects the real cash that a business generates and can use for operations, investments, and debt repayment. This makes cash flow a more reliable indicator of a company's ability to sustain and grow its value over time. Ultimately, investors and analysts prioritize cash flow for its direct impact on a firm's financial viability and potential returns.


What is nominal interest?

Nominal InterestA nominal interest rate is the interest rate that does not compensate for inflation. This is used in relation to "effective interest rate" or "real interest rate."" Real Interest Rate = Nominal Interest Rate - Inflation Rate " Improvement suggested by Palash Bagchi.

Related Questions

What is difference nominal cash flow and real cash flow?

Assuming we're using the cash-flows (Cf) and the required return rate (r) to calculate the Net Present Value (NPV), We need to follow the Rule of Consistency, which is to say, if our (r) is stated in real terms, we must use Real (Cf), and vice versa. Helpful formulas: To adjust Real (Cf) to Nominal, we compound it (n) periods, using the rate of inflation (inf), viz: (Cf-real) * (1+inf)^(n) Similarly, to adjust Nominal (Cf) to Real, we discount it viz: (Cf-nominal) / (1+inf)^(n) The Fisher Theorem illustrates the relation between real and nominal rates, viz: (1+r-nom) = (1+r-real) * (1+inf)


Is Weighted average cost of capital real or nominal?

The Weighted Average Cost of Capital (WACC) can be expressed in either real or nominal terms, depending on the context. A nominal WACC includes the effects of inflation, while a real WACC adjusts for inflation to reflect the true cost of capital in purchasing power terms. The choice between the two typically depends on the cash flows being discounted; if they are nominal cash flows, nominal WACC is used, and for real cash flows, the real WACC is appropriate.


Is retained earnings a real account?

It is not a personal a/c, nor a nominal account, alike cash it is real a/c.


Can TVM be used to evaluate the real return or just the nominal return?

TVM, or Time Value of Money can certainly be used to calculate a real return. The only difference between a nominal return and a real return is inflation, so simply discount your future cash flows by anticipated inflation and you have a real return. In simpler terms assuming inflation is steady you could simply deduct inflation from your nominal return. For example a nominal 7% return with 3% inflation could be desribed as a 4% real return.


The GDP gap measures the difference between?

nominal GDP and real GDP.


What is the difference between 'real wage' and 'nominal wage'?

blAH BLAH BLHA


How does the real interest rate relate to the nominal interest rate?

A real interest rate and a nominal interest rate are quite similar. The only real difference between the two interest rates are that a nominal interest rate include the cost of inflation where as the real interest rate does not.


Which types of accounts are closed?

Typically, nominal accounts are closed on a periodic basis..iincome and expense are nominal accounts. Real accounts ...such as cash, accounts receivable, accounts payable are real accounts are not closed and are carried forward to subsequenr periods.


Accounting in real estate cash flow game?

I have trouble in doing accounting work in real estate cash flow game. I have add. And it is very confusing. Can you help. Thank You Jerome Back


Is unearned revenue is nominal account?

Unearned ravenue is liability account as revenue is not yet earned but cash received.


What is a real estate cash flow note?

Cash flow notes are legal documents that promise the borrower will repay the lender. There are currently 60 types of cash flow notes. Read more at http://askville.amazon.com/exact-definition-term-cash-flow-notes/AnswerViewer.do?requestId=32026025.


Where can I find the definition for cash flow notes other than google?

Answers.Yahoo.com and Real-Estate-Online both have good definitions of what cash flow notes are.