cash flow model

These cash flow projections wil indicate to the banker the cash that you expect to flow into and out of your busines during the start-up months and years. Hence, unexpected stock returns of a typical firm are driven by changes in expectations of cash flows and discount rates for al future periods. Since this likelihod is directly afected by the ability of the firm to generate cash in the near future, any news about the firm's cash flows should have a strong impact on its curent stock price. Put diferently, it is more likely that a firm wil go bankrupt due to a decrease in its expected cash flows, rather than an increase in its discount rate. As Campbel 191 notes, expected-return news is dominant since changes in expected returns are more persistent than changes in expected cash flows. Hence, for firms with short life expectancies, such as financialy distresed firms, persistence has les of an efect, implying a weaker stronger impact of news about future returns cash flows on curent firm value. If your fledgling busines does not have enough cash flow to get it through the first months of busines then surely it wil fail before it realy has time to grow.
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