What is an 'Unconventional Cash Flow'
An unconventional cash flow is a series of inward and outward cash flows over time in which there is more than one change in the cash flow direction. This contrasts with a conventional cash flow, where there is only one change in cash flow direction. In terms of mathematical notation, where the "" sign represents an outflow and "+" denotes an inflow, an unconventional cash flow could appear as , +, +, +, , + or alternatively +, , , +, .
Cash flows are modeled for net present value (NPV) analysis in capital budgeting. An unconventional cash flow is more difficult to handle in NPV analysis than conventional cash flow since it will produce multiple internal rates of return (IRR), depending on the number of changes in cash flow direction.
BREAKING DOWN 'Unconventional Cash Flow'
In real life situations, examples of unconventional cash flows are abundant, especially in large projects where periodic maintenance may involve huge outlays of capital. For example, a large thermal power generation project where cash flows are being projected over a 25year period may have cash outflows for the first three years during the construction phase, inflows from years four to 15, an outflow in year 16 for scheduled maintenance, followed by inflows until year 25.
Challenges Posed by Unconventional Cash Flow
A project with a conventional cash flow starts with a negative cash flow (investment period), followed by successive periods of positive cash flows. A single IRR can be calculated from this type of project, with the IRR compared to a company's hurdle rate to determine the economic attractiveness of the contemplated project. However, if a project is subject to another set of negative cash flows in the future, there will be two IRRs, which will cause decision uncertainty for management. For example, if the IRRs are 5% and 15% and the hurdle rate is 10%, management will not have the confidence to go ahead with the investment.

Cash Flow Statement
A cash flow statement is a financial statement that provides ... 
NonOperating Cash Flows
Nonoperating cash flows are inflows and outflows of cash that ... 
Cash Flow From Investing Activities
Cash flow from investing activities reports the total change ... 
Operating Cash Flow Ratio
The operating cash flow ratio is a measure of how well current ... 
Incremental Cash Flow
Incremental cash flow is the gain received from a new project. ... 
Operating Cash Flow Margin
Operating cash flow margin measures cash from operating activities as ...

Investing
Analyze cash flow the easy way
Learn the key components of the cash flow statement, how to analyze and interpret changes in cash, and what improved free cash flow means to shareholders. 
Small Business
Capital Budgeting: Which is Better, IRR or NPV?
Using internal rate of return and net present value for capital budgeting evaluations often end in the same result. But there are times when using NPV to discount cash flows makes more sense. 
Investing
Operating Cash Flow: Better Than Net Income?
Differences between accrual accounting and cash flows show why net income is easier to manipulate. 
Small Business
Calculating IRR with Excel
Find out how to calculate the internal rate of return on investments using Microsoft Excel, as illustrated in different investment scenarios. 
Personal Finance
10 Ways to Improve Cash Flow in Construction
Improving cash flow in construction requires some sectorspecific strategies. 
Investing
Cash Flow Indicator Ratios
Learn about the operating cash flow to sales ratio, free cash flow to operating cash flow ratio and free cash flow coverage ratio. 
Investing
Cash flow statements: Reviewing cash flow from operations
Discover why cash flow from operating activities is significant to businesses, and learn the direct and indirect methods for calculating it.

Free & operating cash flows: What's the Difference?
Learn the difference between free cash flow and operating cash flow. Explore how analysts use earnings and cash flow to evaluate ... Read Answer >> 
Are taxes calculated in operating cash flow?
Learn how taxes are involved with the calculations for a firm's operating cash flow, and the overall significance of operational ... Read Answer >> 
How are cash flow and revenue different?
Both revenue and cash flow are used to help investors and analysts evaluate the financial health of a company. However, there ... Read Answer >> 
How do net income and operating cash flow differ?
Net income is the profit a company has earned for a period while cash flow from operating activities measures, in part, the ... Read Answer >> 
What is the difference between operating cash flow and net income?
Learn how net income is an income statement for a certain period of time, while cash flow shows inflows and outflows based ... Read Answer >>