Last Updated on September 6, 2026 by Maged kamel
Cash flow in-and-out diagram.
The difference between the cash flow in-and-out diagram.
Cash inflows are sources of cash, including receipts, revenues, income, and savings generated by project and business activities.
The inflows are represented by a plus sign (+), hence the term “cash inflows.”
Cash outflows are sources of cash leaving the business, such as costs. An amount that must be paid or spent to buy or obtain something. While disbursements are payments made from a loan, expenses are costs incurred for a particular purpose.
A compulsory contribution to state revenue.
The cash outflows are the sources of cash out, such as costs, which are amounts that have to be paid or spent to buy or obtain something. While disbursements are payments from a loan, expenses are the costs incurred for something, and taxes are compulsory contributions to state revenue.
Projects and business activities cause cash outflows. The outflows are represented by a negative sign (-), indicating cash outflows.
When a project involves only costs, the minus sign may be omitted for specific techniques, such as benefit-cost analysis.
An example of a cash flow in-and-out diagram.
This is an example of a cash flow in-and-out diagram for 5 years; the X-axis represents the time scale. The axis is divided into five equal spaces from 0 to 5.
The interval from 0 to 1 represents the first year period, from 1 to 2 represents the second year, from 2 to 3 represents the third year, from 3 to 4 represents the fourth year, and from 4 to 5 represents the fifth year.
What matters is that the cash flow is the plus sign (+) for cash in and the minus sign (-) for Money out.
This is shown on the vertical axis. At time t = 0, the present is considered, and t = 1 represents the end of the period, one year later. We assume that the periods are in years for now.
The time scale is set for 5 years. Since the end of the year is the convention, cash flows are at the end of a year; the “1” marks the end of year 1. As shown in this cash flow, at the end of the first year, Money is received, represented by an upward arrow.
At the end of the second year, payment is made (cash-out or outflow/expense), and an arrow points downwards.
At the end of the third year, there are expenses as well, represented by a downward-pointing arrow; cash inflows are expected at the end of the fifth year, with income unknown.
There is an example: you borrowed $8500 at time = 0. First, we draw the scale, but check the scale units for cash flow in and out of the diagram and the total time duration. We have time in weeks; we have time 0 and two time intervals, 1 and 2. The x-axis title is written as “weeks”.
The income is represented by the(+) sign, and the expenses or outflows by the minus(-) sign.
You borrowed $8500 at time t=0; the borrowed Money is considered cash-in, and an upward arrow is drawn at t=0, or now. After one week, at t=1, he bought a car for $8000, which is expressed as -$8000 since it is a cash outflow and is drawn with a downward arrow.
A paint job is done at t=2, with expenses of $ 500. A negative sign is placed since this represents an expense, and a downward arrow is drawn at t=2. The arrow is drawn with a small scale to represent the $500. This is the sketch from the borrower’s perspective.
For the different perspectives, the value and time are shown as follows: In the case of the bank, a loan of $ 8,500 was given, which will be represented by the (-) sign in the bank’s cash-in and cash-out diagram.
The car dealer’s cash-in and cash-out has an income of $8000; after selling a car, which is cash-in at t=1, this income will have a (+) sign.
For the painter, the cash-in and cash-out transactions resulted in a $500 receipt, as cash-in represents an income or inflow and has a (+) sign at t=2.
A solved Example 1.10 for a cash flow in-and-out diagram.
This is an example from Prof. Anthony Tarquin’s book, Engineering Economy, on how to draw a cash flow in-and-out diagram.
Example 1.10 – An electrical engineer wants to deposit an amount P now such that she can withdraw an equal amount of A1, $2000 per year, for the first 5 years, starting 1 year after the deposit, and a different annual withdrawal of A2, $3000 per year, for the following 3 years. How would the cash-flow diagram appear if i =8.5% per year?
The solution can be done through these steps:
1- Draw a timeline and divide it into eight equal intervals.
2- She deposited at t=0 is represented by a(-) sign since she withdraws Money from the other resource. For the cash flow in-and-out diagram, the Present value of P is estimated and represented by a downward arrow; it is called P.3.
She can withdraw an equal annual A1=$2000 for the next 5 years; we draw five equal arrows at t=1, t=2, t=3, t=4, and at t=5 at the x-axis for time intervals in years
The arrows are drawn as upward arrows.
4-She can withdraw A2=$3000, which are drawn as an equal arrow at t=6, t=7, and t=8.
Each arrow is an income and is drawn in the (+) direction in the cash flow in and out diagram on the x-axis for time intervals in years. The arrows are drawn upward, and the heights of the last three years are longer than those for A1, since the A2 value is larger. The cash flow in and out diagram is completed.
Terminology and symbols.
The equations and procedure of engineering economy utilize the following terms and symbols to make these symbols unique and universal; sample units are:
P: The value of the amount of Money at the time designated as the present or time 0.
F: the value of Money or amount of Money in the future.
Also, F is called the future worth, or future value(FV) in dollars.
A is a series of consecutive, equal, and end-of-period amounts of Money. It is also called annual worth (AW) or equivalent uniform annual worth (EUAW). n: number of interest periods; I:
I: interest rate per year, or, unless otherwise mentioned, per month, or percent per month. t: time, stated in periods: years, months, days.
Economic factors.
As with creating an equation, if we need F, we set it equal to P(F/P), where P is in the numerator and the denominator; P cancels out.
Then, F is on the left-hand side, and F is on the right-hand side.
However, if we want P, the present value, as a function of the given F, then P = F(P/F). If the F value is given, i% and n are also provided.
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