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Why is the concept of the time value of money a very important financial concept both for organizations and for individuals?
Brendajohatch
Time Value of Money Time Value of Money is an important concept in financial management. It is one of the important tools used in project appraisals to compare various investment alternatives, and solve problems involved in loans, mortgages, leases, savings, and annuities. A key concept behind Time Value of Money is that a single sum of money or a series of equal, evenly spaced payments or receipts promised in the future, can be converted to an equivalent value today. Conversely, you can determine the value to which a single sum or a series of future payments will grow to at some future date. The former is called Present Value of Cash Flows and the later is called Future Value of Cash Flows.
Wiki User
∙ 16y ago
Wiki User
∙ 9y agoThe concept of the time value of money (TVM) is a very important financial concept, both for organizations and for individuals because it is a tool used to gauge comparison of investment alternatives, and to solve problems concerning mortgages, loans, leases,savings, and annuities.
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