Real cash flow

(redirected from Real Cash Flows)

Real cash flow

Income expressed in current purchasing power terms.

Real Cash Flow

A company's cash flow for a certain period of time adjusted for inflation. For example, if a company wishes to compare its annual cash flows between 1995 and 2005, it may adjust all figures and reflect them in 2005 dollars. The real cash flow gives a company an idea of how it is really performing from one period of time to the next.
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Discuss the problem with using real cash flows and a nominal WACC when calculating a project's NPV or IRR.
As such, they are best suited to corporate situations where stable real cash flows are highly valued and yield is relatively less important, since the portfolio is almost certain to pay a premium to acquire the inflation protection.