Which of the following methods is commonly used to forecast cash flows?

The correct answer encompasses a broad view of forecasting methodologies, recognizing that each of these methods has its distinct applications and benefits in cash flow forecasting.

Time series analysis is a statistical technique that analyzes historical data points collected or recorded at specific time intervals. This method is useful in identifying trends, seasonal patterns, and cyclical behaviors in cash flows, making it a critical tool for forecasting future cash inflows and outflows based on past performance.

Exponential smoothing, on the other hand, is a forecasting technique that applies decreasing weights to older observations, which helps in making more responsive forecasts that can adapt to changes in data trends. This approach is particularly effective for smoothing out short-term fluctuations and highlighting longer-term trends, ensuring that forecasted cash flows are adjusted based on the most recent data.

Discounted cash flow analysis (DCF) is used primarily to value an investment by estimating future cash flows and discounting them to present value using a required rate of return. While DCF is often associated with investment valuation, its underlying principle of forecasting cash flows is critical, especially in assessing the viability of future projects or investments.

By incorporating all three methods, organizations can create a more comprehensive and robust forecast of cash flows, utilizing the strengths of each approach. This multi-faceted