Discretionary Cash Flow


DEFINITION of 'Discretionary Cash Flow'

Discretionary cash flow is any money left over once all possible capital projects with positive net present values have been financed, and all mandatory payments have been paid. The capital can be used to pay for other responsibilities such as giving out cash dividends to stockholders, buying back common stock and paying off any outstanding debt.

BREAKING DOWN 'Discretionary Cash Flow'

How discretionary cash flow is distributed is the responsibility of management. They decide how to use the funds to benefit the company the most. The way these funds are allocated can have huge affects on the performance of the company, and as a result the evaluation of the effectiveness of management.

  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out ...
  2. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present ...
  3. Disposable Income

    The amount of money that households have available for spending ...
  4. Discretionary Income

    The amount of an individual's income that is left for spending, ...
  5. Discounted Cash Flow (DCF)

    Discounted cash flow (DCF) is a valuation method used to estimate ...
  6. Cash Conversion Cycle - CCC

    A metric that expresses the length of time, in days, that it ...
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  1. What are the disadvantages of using net present value as an investment criterion?

    While net present value (NPV) calculations are useful when you are valuing investment opportunities, the process is by no ... Read Full Answer >>
  2. Which is a better measure for capital budgeting, IRR or NPV?

    In capital budgeting, there are a number of different approaches that can be used to evaluate any given project, and each ... Read Full Answer >>
  3. Do you discount working capital in net present value (NPV)?

    Net present value (NPV) calculations should include the discounted value of changes in working capital. This treatment of ... Read Full Answer >>
  4. How is working capital different from fixed capital?

    There are several key differences between working capital and fixed capital. Most importantly, these two forms of capital ... Read Full Answer >>
  5. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  6. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>

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