Time Value Of Money Introduction - Accounts and Finance for Managers

The time value of money has gained greater importance in studying the viability of the project by comparing the initial investment with the anticipated future benefits. If the anticipated future benefits are more than the initial investment then the investment is found to be viable in generating the economic benefits.
Why the time value of money principle is warranted to study under the financial management ?
The following are the many reasons involved:
To determine the real rate of return

  • With reference to Money employment on productive assets
  • In an inflationary period, a rupee today has greater purchasing power than rupee in the future
  • The future is uncertain- Individuals prefer current consumption rather than future consumption

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