Explain the time value of money

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The flagship theme of corporation finance and finance in general is the time value of money. Depending on a business' financial circumstances, cash flows received earlier may be more beneficial than cash flows recieved later. Factors that may influence whether corporations or even individuals, would rather receive cash flows earlier or later, is often driven by tax liability. Many accountants will advise clients/businesses to delay receiving cash flows late in the year, and instead receive those same cash flows the following fiscal year, in order to defer income to minimize tax liability.

Explain the time value of money and why businesses or individuals, may both, wish to delay receiving cash flows or receive cash flows earlier.

Reference no: EM132373608

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