discussions - 5113-9 Explain the importance of time value...

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5113-9 Explain the importance of time value analysis in making financial decisions. A finance manager is required to make decisions on investment, financing and dividend in view of the company's objectives. The decisions as purchase of assets or procurement of funds i.e. the investment/financing decisions affect the cash flow in different time periods. Cash outflows would be at one point of time and inflow at some other point of time, hence, they are not comparable due to the change in rupee value of money. They can be made comparable by introducing the interest factor. In the theory of finance, the interest factor is one of the crucial and exclusive concept, known as the time value of money. Time value of money means that worth of a rupee received today is different from the same received in future. The preference for money now as compared to future is known as time preference of money. The concept is applicable to both individuals and business houses. Importance of time value of money : The concept of time value of money helps in arriving at the comparable value of the different rupee amount arising at different points of time into equivalent values of a particular point of time, present or future. The cash flows arising at
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