When entering variables in a spreadsheet function (or in a financial calculator) the "sign convention" can be critical to achieving a correct answer. The sign convention says that outflows are negative values; inflows are positive values. For which variables is this a consideration?

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Mango

Business

21 July, 15:55

When entering variables in a spreadsheet function (or in a financial calculator) the "sign convention" can be critical to achieving a correct answer. The sign convention says that outflows are negative values; inflows are positive values. For which variables is this a consideration?

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Hillary Guerrero · Answer 1

Answer: Cash flow variables.

Explanation:When entering variables in a spreadsheet function or in a financial modelling, sign convention is applied appropriately.

Sign convention indicates whether an amount is a cash inflow or cash outflow. Mostly, cash outflows are represented by a negative sign while cash inflows are represented by a positive sign.

Furthermore, in accounting, profit and loss items are distinguished by using positive signs for revenue or income items while negative signs relate to the cost or expense items. Also, in Balance Sheet items, assets and equity are assigned positive signs while negative signs are used for liabilities.

Furthermore, cash flow sign convention is applied appropriately to keep the direction of the Cash flow straight. Hence, cash inflows are entered as positive numbers and cash outflows are entered as negative numbers.