The concept of time value of money states that money accessible now is worth more than

money available later owing to its prospective earning capability. The notion of time worth of
money is extensively utilized in financial literature. Financial decision models based on finance
theories are primarily concerned with maximizing shareholder economic welfare. A
fundamental concept in finance is that money earned today is worth more than money earned
later. The allocation of funds into long-term investment projects is the subject of the
investment decision. Long-term investment cash flow occurs at a separate point in time in the
future. To put it another way, investment decisions are based on whether increasing capital
assets now will raise revenues enough to pay expenditures later. Investors in securities benefit
from understanding the idea of time value of money. When investing in assets such as stocks
and bonds, they utilize valuation models. The temporal value of cash flows from assets is taken
into account in these security valuation methods.

Every business owner is worried about cash flow, and the time value of money explains why
getting cash in a timely manner is advantageous. Variables may be entered into different
formulas to calculate the current and future worth of payments. In addition, annuity tables let
you figure out how much a stream of payments is worth. A sum of money kept today is more
valuable than a future payout, according to the temporal value of money (TVM). This money
idea is correct since today's funds may be invested to produce a profit. The net present value of
money is another term for the time value of money. When you collect money quicker, you have
more money to buy merchandise, pay for marketing, and pay your employees. You have more
flexibility with a higher cash balance. If you find a chance to establish a new product line or buy
a competitor's company, you'll be able to fund it with cash.