Connect with us

Time Value of Money Terms and Definitions

Looking for time value of money terms and definitions? They are here.

  • Present value – The value now of a given amount to be paid or received in the future assuming compound interest.
  • Net present value (NPV) – The difference that results when the original capital outlay is subtracted from the discounted net cash flows.
  • Net present value method – Discounts net cash flows to their present value and then compares that present value to the capital outlay required by the investment.
  • Annuity – A series of equal dollar amounts to be paid or received periodically.
  • Present value of an annuity – The value now of a series of future receipts or payments, discounted assuming compound interest.
  • Compound interest – The interest computed on the principal and any interest earned that has not been paid or withdrawn.
  • Discounting the future amount(s) – The process of determining present value.
  • Interest – Payment for the use of another’s money.
  • Principal – The amount borrowed or invested.
  • Simple interest – The interest computed on the principal only.
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Are you looking for easy accounting tutorial? Established since 2007, hosts more than 1300 articles (still growing), and has helped millions accounting student, teacher, junior accountants and small business owners, worldwide.