The future cash flow of any investment has to be estimated. In reality estimating cash flow is the most difficult task. It is because of uncertainty & accounting ambiguities. Event affecting the investment opportunities change rapidly and unexpectedly. Anticipation of change in the events is not an easy task. Mostly accounting data forms the basis for estimation of cash flows. Accounting data are the result of arbitrary assumptions, choices and allocations. Hence it needs to be adjusted as errors may occur while estimating cash flow. The steps in preparing a cash flow statement has been simplified into the steps below.
