Cash Flow Sign Convention – Using signs (negatives) in Formulas
This convention, used by financial calculators and spreadsheet functions, specifies that the sign (i.e., positive or negative numbers) indicate the direction of the cash flow.
Cash inflows are entered as positive numbers, and cash outflows are entered as negative numbers.
Whether a cash flow is an inflow (+) or outflow (-) depends on the part that you play in a transaction.
For example, loan payments are an outflow (-) for the borrower, but an inflow (+) for the lender. In an ordinary annuity, a constant cash flow is either paid or received at the end of a particular payment period over the life of an investment or liability.
Let us look at a few examples to help understand when to use a positive and when to use a negative.
