Incorrect Cash Flow? (Investor Cash Flow)
Since The investors are having a negetive cash flow at the begging of 2023 , wouldnt it be more sensible to put it under 2022 as the financials are on year end basis.
Also the IRR follows PV in ordinary basis ,i.e, End Basis so it'll be incorrect to include it in 2023 as the formula will compute it as the cash flow happened in 2023 end and would give an incorrect output.
Hello,
In financial reporting, it's crucial to align the recording of transactions with the period in which they actually occur. If the investors experienced negative cash flow at the beginning of 2023, it should indeed be recorded in 2023. This is because financial statements are usually prepared on an accrual basis, meaning expenses and revenues are recognized when they occur, not when cash is exchanged. Including this cash flow under 2022 could potentially mislead stakeholders about the financial health and timing of cash movements within that specific fiscal year.
Regarding IRR computation, the way the spreadsheet is organized (the two cashflows are in different cells), ensures we wouldn't have an issue with the calculation of IRR.
Best,
Ned
Thanks a bunch Ned.
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