What does "CF" stand for in the DCF formula?

In the context of the DCF (Discounted Cash Flow) formula, "CF" stands for Cash Flow. This is a crucial element in the DCF analysis, as it refers to the net amount of cash being transferred into and out of a business. Cash flows represent the actual liquidity generated by an investment or business operation over a specific period and are essential for evaluating the profitability and viability of a project.

The DCF method utilizes projected future cash flows, discounting them back to their present value using an appropriate discount rate. This process helps investors and analysts gauge the current worth of an investment based on its expected future cash generation. Accurately estimating cash flows is vital, as it directly influences the valuation derived from the DCF approach.

Understanding that "CF" refers specifically to Cash Flow underscores its importance within the DCF framework, helping practitioners focus on the liquidity and financial health of the investments they analyze.