Question

Why is the estimation of property level cash inflows and outflows often just the first step in determining the cash flows and returns expected by various investors in the ownership entity?

Answer 1

Estimation of property level cash inflows and outflows is always the first step because cash flows are inherent to overall business, and they should always be estimated in order to record the overall gain or loss which is to be made on a particular project.

cash flows are independent in nature and all other factors of the firm are dependent of the cash flows as profits reporting and revenue reporting are also based on the cash flow so if a cash flow of a firm is high that means that the firm has enough liquidity and it will also lose upon lesser opportunities and it will be beneficial in the long run as it will not go insolvent.

The most important factor related to cash flow is that it estimates the solvency and liquidity of the firm in the long run.