Discretionary Cash Flow

AAA

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.

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.

RELATED TERMS
  1. Net Present Value - NPV

    The difference between the present value of cash inflows and ...
  2. Disposable Income

    The amount of money that households have available for spending ...
  3. Cash Flow

    1. A revenue or expense stream that changes a cash account over ...
  4. Discretionary Income

    The amount of an individual's income that is left for spending, ...
  5. Capital Expenditure (CAPEX)

    Funds used by a company to acquire or upgrade physical assets ...
  6. Working Capital

    This ratio indicates whether a company has enough short term ...
RELATED FAQS
  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. What are the tax benefits of establishing a sinking fund?

    The primary tax benefit available through the creation of a sinking fund is a deduction for interest payments made. The other ... Read Full Answer >>
  4. How can a growing business avoid stagnation when using zero-based budgeting?

    Zero-based budgeting is commonly used by companies to review expenses in their annual budgets and create cost management ... Read Full Answer >>
  5. How does zero-based budgeting help lower operating costs?

    Zero-based budgeting helps lower costs by reducing unproductive spending. Zero-based budgeting is a rigorous process that ... Read Full Answer >>
  6. What does the book-to-bill ratio in the electronics sector refer to?

    The collection and analysis of data can significantly complement and enhance operations management, leading to increased ... Read Full Answer >>
Related Articles
  1. Credit & Loans

    Digging Out Of Personal Debt

    Find out why good intentions can put consumers in an even bigger hole than before.
  2. Markets

    Intangible Assets Provide Real Value To Stocks

    Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
  3. Economics

    Modified Internal Rate of Return (MIRR)

    Modified internal rate of return (MIRR) is a variant of the more traditional internal rate of return calculation.
  4. Economics

    Explaining Residual Value

    Residual value is a measurement of how much a fixed asset is worth at the end of its lease, or at the end of its useful life.
  5. Economics

    What is the Cash Ratio?

    The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities.
  6. Stock Analysis

    Fight Volatility and Inflation with Infrastructure

    As institutional investors flock to infrastructure assets there's good reason for retail investors to follow suit.
  7. Economics

    What is M1?

    M1 is a measurement of money supply that includes all hard currency, plus demand deposits such as checking accounts.
  8. Stock Analysis

    Can Eagle Rock Energy Partners Soar In 2015?

    Eagle Rock Energy has seen its prices drop, but there is a ray of hope that could send units higher in 2015 even if the price of oil doesn’t rally.
  9. Stock Analysis

    Freeport-McMoRan Is Seeking A Helping Hand

    Freeport-McMoRan doesn't have the cash to invest in its planned oil and gas developments, which is forcing it to look for help in funding these projects.
  10. Stock Analysis

    Chesapeake Energy Sees History Repeating Itself

    Chesapeake was on the wrong side of natural gas when its price plunged in 2012, and it appears to be repeating itself after the price of oil plummeted.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center