Difference between Cash flow and Discounted cash flow

Difference between Cash flow and Discounted cash flow

Cash flow

Cash flow basically a financial statement item which explain the how cash is generated and how it was spent during the period.

Discounted cash Flow

Discounted cash flow is tool of decision making for investment and it takes into account future cash flow and net present value of those cash flow are calculated for investment decision. A investment is accepted if net present value of investment is more than zero.

1. Bases of preparation

Cash flow is prepared on the historical information. Where discounted cash flow takes into account future cash flows information.

2. Reporting

Cash flow is an integral part of financial statement where the discounted cash flow prepared to serve the management need for decision making.

3. Techniques

Cash flow is prepared as per guideline of international accounting standard. Discounted cash flow is prepared in a form and format which facilitate decision making.

4. Level of expertise

Cash flow preparation does not require a deep knowledge of accounting and can be prepared without any difficult. Discounted cash flow requires a deep understanding of underlying concept and different qualitative techniques and formula.