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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.
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Investopedia explains '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.
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Accounting rules require companies to classify their natural cash flows into one of three buckets. Together these buckets constitute the statement of cash flows.
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Find out why good intentions can put consumers in an even bigger hole than before.
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