Explain the concept of real flow and nominal flow
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Nominal cash flow:
Nominal cash flow refers to the actual dollar amount of money that a company expects to take in and pay out, without any adjustment for inflation. This is useful for anticipating future revenue and expenses. For example, if a company wants to project how much it will be spending on office rent during the next decade, it could take the dollar amount of its rent, and use the average annual rent increase to project how much it will spend in subsequent years.
Real cash flow:
Real cash flow is adjusted for inflation in order to reflect the change in the value of money over time. Because inflation can vary significantly from year to year.
Hope it helps you ^_^
Nominal cash flow:
Nominal cash flow refers to the actual dollar amount of money that a company expects to take in and pay out, without any adjustment for inflation. This is useful for anticipating future revenue and expenses. For example, if a company wants to project how much it will be spending on office rent during the next decade, it could take the dollar amount of its rent, and use the average annual rent increase to project how much it will spend in subsequent years.
Real cash flow:
Real cash flow is adjusted for inflation in order to reflect the change in the value of money over time. Because inflation can vary significantly from year to year.
Hope it helps you ^_^
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