Important for financial managers to understand the concept of time value of money

By loaning money to you, they are effectively losing the opportunity to use that money elsewhere to generate returns for themselves.

importance of time value of money pdf

Concepts discussed include strategy formulation at the corporate and business levels, interrelationships between firms and their environments; corporate governance and strategy implementation issues. Provided money can earn interest, this core principle of finance holds that any amount of money is worth more the sooner it is received.

This is called a present value calculation, and helps me decide if giving up my money today in exchange for a series of payments in the future makes sense.

This is also where the idea of good debt comes from.

importance of time value of money in healthcare

Tip The time value of money is the concept that cash in your pocket today is worth more than cash in your pocket in the future, because you can invest it to make more money. I both agree and disagree. Another example is a consol, which is a bond that makes interest payments forever but does not repay the principal.

importance of time value of money in capital budgeting
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Time Value of Money