A dollar today is worth more than a dollar to be received in the future. The difference between the presentvalue of cash flows and their future value represents the time value of money. Interest is the rent paid forthe use of money over time.

A dollar today is worth more than a dollar to be received in the future. The difference between the presentvalue of cash flows and their future value represents the time value of money. Interest is the rent paid forthe use of money over time.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A dollar today is worth more than a dollar to be received in the future. The difference between the present
value of cash flows and their future value represents the time value of money. Interest is the rent paid for
the use of money over time.

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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