Time value of money, Financial Accounting

The concept that money has time value is one of the most fundamental notions of investment analysis. For any type of productive asset its value will based on the future cash flows related with that specific asset. So as to assess the adequacy of cash flows one of the significant parameters is to assess the time value of the cash flows that are: Rs.100 acquired after one year would not be similar as Rs.100 received after two years. There are numerous reasons to account for this dissimilarity based upon the timing of the cash flows, several of that are as given below:

  • there is a common preference for present consumption to future consumption,
  • capital or savings can be employed to produce positive returns,
  • because of inflation purchasing power of money decreases over time,
  • Future cash flows are unsure.

Translating the present value of money into its equal future value is considered as compounding. Translating a future value or cash flow in its equivalent value in a prior era is considered to as discounting. This section deals with fundamental mathematical techniques used in discounting and compounding.

Posted Date: 4/9/2013 2:22:55 AM | Location : United States







Related Discussions:- Time value of money, Assignment Help, Ask Question on Time value of money, Get Answer, Expert's Help, Time value of money Discussions

Write discussion on Time value of money
Your posts are moderated
Related Questions
Stock A has an expected return of 9 percent, a standard deviation of 20 percent, and a market beta of 0.5. Stock B has an expected rate of return of 10 percent, a standard deviatio

1.what are the various fields of accounting and how do they differ? 2. how are revenues and expenses affect the owners' equity account? 3. why are revenues and expenses recor

1. Calculate the profitability index for a project that has a net present value equal to -$10,000. The project's net investment is $20,000. 2. A project requires a net investmen

Concept of  financial Accounting Accounting is the art of recording, classifying and summarizing the business transactions and events. Double Entry System is the base for reco

Write  the advantages and drawbacks of both the structured and object-oriented (OO) paradigm in programming. Describe the perceived preference of OO languages over the more structu

Amortized Payment You purchase a house that costs $800,000 with an 8%, 30-year mortgage. You make a 20% down payment to avoid PMI insurance. (i) What is your monthly paymen

Asset Acquisition An alternate way of conducting a buyout by purchasing few assets an industry may have inspite of purchasing that organizations stock.

A parent has had a controlling interest of 60% in its subsidiary for a number of years. Below are financial statement extracts of the two companies for the year ended 30 June 20

Q. Standards for Accounting and Review Services? Statements on Standards for Accounting and Review Services (SSARS) - Statements issued by AMERICAN INSTITUTE OF CERTIFIED PUBLI

You are evaluating a project which costs $720,000, has a four-year life, and no salvage value. Depreciation is straight-line and the half year rule does not apply. Sales are projec