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    Inflation & Cash flow

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    Talib Al_Munawri
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    Inflation & Cash flow

    Post by Talib Al_Munawri on Sun Sep 27, 2009 10:36 pm

    "inflation"



    The term "inflation" usually refers to a measured rise in a broad
    price index that represents the overall level of prices in goods and
    services in the economy. The Consumer Price Index(CPI), the Personal
    Consumption Expenditures Price Index (PCEPI) and the GDP deflator are
    some examples of broad price indices.


    The term inflation may also be used to describe the rising level of
    prices in a narrow set of assets, goods or services within the economy,
    such as commodities (which include food, fuel, metals), financial
    assets (such as stocks, bonds and real estate), and services (such
    as entertainment and health care).


    The Reuters-CRB Index (CCI), the Producer Price Index, and Employment
    Cost Index (ECI) are examples of narrow price indices used to measure
    price inflation in particular sectors of the economy. Asset price
    inflation is a rise in the price of assets, as opposed to goods and
    services.

    Core inflation is a measure of price fluctuations in a sub-set of
    the broad price index which excludes food and energy prices.
    The Federal Reserve Board uses the core inflation rate to measure
    overall inflation, eliminating food and energy prices to mitigate
    against short term price fluctuations that could distort estimates
    of future long term inflation trends in the general economy.


    Other related economic concepts include:


    Deflation – a fall in the general price level

    Disinflation – a decrease in the rate of inflation

    Hyperinflation – an out-of-control inflationary spiral

    Stagflation – a combination of inflation, slow economic growth and high unemployment

    reflation – an attempt to raise the general level of prices to counteract deflationary pressures.


    Measures


    Inflation is usually estimated by calculating the inflation rate of
    a price index, usually the Consumer Price Index. The Consumer Price
    Index measures prices of a selection of goods and services purchased
    by a "typical consumer" The inflation rate is the percentage rate of
    change of a price index over time.


    For example, in January 2007, the U.S. Consumer Price Index was 202.416,
    and in January 2008 it was 211.080. The formula for calculating the
    annual percentage rate inflation in the CPI over the course of 2007 is



    The resulting inflation rate for the CPI in this one year period is 4.28%,
    meaning the general level of prices for typical U.S. consumers rose
    by approximately four percent in 2007.






    If P0 is the current average price level and P − 1 is the price level
    a year ago, the rate of inflation during the year might be measured
    as follows:




    After the year the purchasing power of a unit of money is multiplied
    by a factor 1 / ( 1 + inflation rate ).


    There are other ways of defining the inflation rate, such as logP0 − logP − 1 (using the natural log),
    again stated as a percentage. In this case after the year the purchasing
    power of a unit of money is multiplied by a factor e − inflation rate.


    There are two general methods for calculating inflation rates - one
    is to use a base period, the other is to use "chained" measurements.
    Chained measurements adjust not only the prices, but the contents of
    the market basket involved, with each price period. More common, however,
    is the base period reference. This can be seen from inflation reports
    from the "relative weight" assigned to each component, and by looking
    at the technical notes to see what each item in an inflation basket represents
    and how it is calculated.




    Cash flow

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    The cash flow statement was previously known as the statement of
    changes in financial position or flow of funds statement
    .
    The cash flow statement reflects a firm's liquidity or solvency


    The balance sheet is a snapshot of a firm's financial resources and
    obligations at a single point in time, and the income statement
    summarizes a firm's financial transactions over an interval of time.


    These two financial statements reflect the accrual basis accounting
    used by firms to match revenues with the expenses associated with
    generating those revenues. The cash flow statement includes only
    inflows and outflows of cash and cash equivalents; it excludes transactions
    that do not directly affect cash receipts and payments. These noncash
    transactions include depreciation or write-offs on bad debts to name a few.

    The cash flow statement is a cash basis report on three types of financial activities:

    operating activities
    investing activities
    financing activities
    Noncash activities are usually reported in footnotes.


    The cash flow statement is intended to :


    provide information on a firm's liquidity and solvency and its ability to change cash flows in future circumstances

    provide additional information for evaluating changes in assets, liabilities and equity

    improve the comparability of different firms' operating performance by eliminating the effects of different accounting methods

    indicate the amount, timing and probability of future cash flows
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    LoRdBOy
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    Re: Inflation & Cash flow

    Post by LoRdBOy on Sun Sep 27, 2009 10:41 pm

    its realy great work

    well done

    thanX bro
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    juwel
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    Re: Inflation & Cash flow

    Post by juwel on Mon Sep 28, 2009 3:23 am

    Thnx Mr/Brovesor 4 the nice topic...
    all da best...
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    Future Eng.
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    Location : some.where.near.by!

    Re: Inflation & Cash flow

    Post by Future Eng. on Mon Sep 28, 2009 8:40 pm

    It's real a great work my friend.

    Thanks indeed for helping us to study easily.

    all da best to
    all
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    Talib Al_Munawri
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    Posts : 337
    Join date : 2009-07-03
    Age : 30
    Location : Sultanate of Oman

    Re: Inflation & Cash flow

    Post by Talib Al_Munawri on Fri Dec 04, 2009 7:35 pm

    than x my friends

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