Sanjin Stanković

Interaction of Net Present Value, Cash Flow and Financial Statements

Adjustment of the specific national economic system to the economic system of the European countries implies abandoning traditional economic methods and implementation of the standards used in EU. It equally applies to economic, market, financial and other standards among which are the accounting standards.This fact is important from the financial analysis` point of view, because financial indicators cannot be compared nor can be necessary analysis conducted without application of international accounting standards. Those financial indicators and analysis form the basis for making business decisions. The application of international financial reporting standards changes presented financial position on a large scale, that is investment potential, net present value and application of cash flow. This is discussed in the paper on the examples from Croatia and Bosnia and Herzegovina.Applying different accounting standards results in changes in presented business results, in terms of profitability, financial opportunities and capabilities, assessment of credit-worthiness and other indicators of financial position and profitability.The paper elaborates the application of the present value method with the present value serving as goal value in net assets valuation, showing the difference in data obtained with traditional historical cost.