What do you mean by time value of money, Financial Management

Assignment Help:

Q. What do you mean by Time value of money ?

The concept of TVM refers to the fact that the money received today is different in its worth from the money receivable at some other time in future. In other words, the same principle can be stated as that the money receivable in future is less valuable than the money received today. For example, if an individual is given an option to receive Rs. 1,000 today or to receive the same amount after one year, he will definitely choose to receive the amount today (of course he is presumed to be a rational being). The obvious reason for this reference for receiving the money today is that the rupee received today has a higher value than the rupee receivable in future. This preference for current money as against future money is known as the time preference for money or simply TVM.

This concept of TVM is applicable in equal strength to individuals as well as to the business firms. In case of most of the decision particularly those taken by a firm, the financial implications may occur over a period of time and quite often over a long period of time even up to ten years or more. Therefore, TVM becomes an important consideration for any financial decision.


Related Discussions:- What do you mean by time value of money

Ratio analysis, How can we calculate ration analysis in financial managemen...

How can we calculate ration analysis in financial management?? Determine the ration analysis? Need assignemt help on this topic

FIANCE AND MANAGERIAL ACCOUNTING, Ask question Open Quick Links Quick Links...

Ask question Open Quick Links Quick Links Page Landmarks Content Outline Keyboard Shortcuts Global Menu Top Frame Tabs My UMass Amherst Tab 1 of 2 (active tab) Help & Resource

Step-up (step down) notes, These types of securities have more ...

These types of securities have more than one coupon rate and each subsequent coupon rate is higher (or lower) than the previous coupon rate. For

Analyse financial statements - strength of business, Learning outcome to be...

Learning outcome to be assessed: analyse financial statements to make decisions on the strength and adaptability of a business. A numerical analysis of the financial statements of

Return risk and security market line /net present value .., return risk and...

return risk and security market line /net present value and investment critirea actually iwill be tested in 6 question culculation and 1 question theory about risks

State the meaning ofunlimited profit sharing, State the meaning ofUnlimited...

State the meaning ofUnlimited profit sharing Unlimited profit sharing means that equity shares have an unlimited potential for dividend payments and price appreciation. Which i

Illustrate the nature of financial management, Q. Illustrate the Nature of ...

Q. Illustrate the Nature of Financial Management? Less Descriptive as well as More Analytical: - Financial management is less descriptive and more analytical. Because of the

the use of a preauthorized check system, In general, what type of firm wou...

In general, what type of firm would benefit from the use of a preauthorized check system and what specific types of companies have successfully used this device to accelerate cash

Why do we focus on cash flows instead of profits, Why do we focus on cash f...

Why do we focus on cash flows instead of profits when evaluating proposed capital budgeting projects? We focus on cash flows at the place of profits when evaluating proposed ca

Calculate actual returns using the dividend discount model, You've just won...

You've just won a huge $100 million lottery.  You've decided to invest your winnings in the following way:  $30 million in real estate,  $30 million in  corporate bonds and $40 mil

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd