Cash Flows and Cash Cows.

The article explains a procedure for determining the products or product lines with the most cash-generating capability. This employs the internal-rate-of-return process which is commonly linked with the capital-budgeting decision. This method requires the calculation of the rate that equates expected future returns with current outlays. Also, the process of calculating product gammas may also reveal unusual characteristics of some products. These may reveal situations which may be remedied such as overstocking, excess lag time in collections for some products, and unfavorable credit terms.