Establish new beginning account balances by using data from prior accounting period
- Roll forward both assets and liabilities on a consistent basis from a consistent earlier date (i.e. last annual review)
- Take the most current asset and liability numbers as a starting point to prepare rollforward estimates of assets and liabilities When referring to securities rollforward, it is when an old options position gets replaced with a new one having a later expiration date (and same strike price)
A 3rd party holds money/funds/other assets for two parties in a transaction
For example, an escrow service will hold funds for the investee and investor until all obligations are fulfilled for the transaction, such as when all necessary documents for the completion of the investment are obtained by the investee and investor and possibly to the escrow as well.
NPV = Present Value of Cash Inflows – Present Value of Cash Outflows
- Compares the value of the dollar today to the value of that same dollar in the future (considering inflation and returns)
- + NPV = positive cash flow (good inflow)
- (- NPV) = negative cash flow (too much outflow)
- Used to analyze profitability of an investment
Internal Rate of Return (noun):
The rate of growth that a project is expected to generate
- NPV of cost (negative cash flow) = NPV of benefits (positive cash flow)
- Used to compare profitability of an investment
- The higher the IRR = The more desirable the investment = better chance of strong growth
- If IRR is > cost of capital = acceptable project
Reference, read more: http://www.investopedia.com/
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