Factors that affect projected cash flows include:
1. Market circumstances: Cash flow is significantly influenced by market circumstances. Depending on
the state of the market, there may or may not be a change in demand for goods and services, which
could cause revenues to fluctuate. For instance, during a recession, the need for luxury goods may
decline, which could impact the cash flow forecasts of a company that sells such goods.
2. Competitor activity: Competitor activity might affect a business's projected cash flow. If a corporation
doesn't provide good products or services or doesn't use effective pricing methods, its competitors may
gain market share. Reduced revenue and hampered cash flow estimates may come from this.
3. A shift in seasonality can have a significant influence on cash flow estimates, whether it's up or down.
For instance, if a company enjoys a sharp rise in sales throughout the holiday season due to higher
demand, it may favor cash flow. On the other hand, if a company operates in a sector with a brief peak
season and significant expenses, cash flow may fluctuate throughout the year.
Because they can have a significant impact on how investors decide which investments to make, accurate
cash flow estimates are crucial.
