Concept Of Time Value Of Money

Concept Of Time Value Of Money

Time value of money concept refers to the truth that one dollar now is value more than one dollar in the future. The reason this fact holds true is due to rates of return. If you have one dollar now, you can spend it and increase concern, while if you receive one dollar in the future, you have missed the chance to spend and make money from the dollar.

The time value of money used

The time value of money used to calculate tax of return on investments, loans, and fixed assets

Time value of money equations

equation can also be used to calculate the present's value of a flow on income in the future as well as determine tha value of one's salary or calculate the predictable

When calculating the time value of money

Types of cash flows

There are two types of cash flow as following

1-  Inflows are monies received from an investment ,such as interest and principal amounts received after the investment has matured

2- Outflows are monies spent on an deal ,such as deposit,costs,and other amounts paid, in finance,outiflows are preceded by a minus sign to indicate the money was spent.

If you are involved in making decisions based on the time values of money, you should use a timeline .A time line is a visual tool used to outline the cash flows of particular investment information found on time lines includes the interest rate, maturity date, outflows, inflows, and the time periods. The variable you are trying to find should be denoted by a question mark.