scholarly journals The Time Value of Money: A Clarifying and Simplifying Approach

2004 ◽  
Vol 1 (7) ◽  
Author(s):  
Norman D. Gardner
Keyword(s):  
Capital Structure ◽  
Business Students ◽  
Capital Budgeting ◽  
Working Capital ◽  
Working Capital Management ◽  
Time Value Of Money ◽  
Time Value ◽  
Value Of Money ◽  
Real Assets ◽  
Multiple Step

The concept of time value of money is critical for business students, financial managers, and anyone who deals with money.  Financial managers must be able to employ TVM concepts competently in order to value both financial and real assets as they make decisions regarding capital budgeting, capital structure, and working capital management. Therefore business students must come to understand and apply correctly time value of money concepts.   This brief note suggests a clarification and a simplification of the pedagogy of TVM, which will result in greater understanding for the student.  These suggestions include redefining the variable "n" in two of the TVM equations; dispensing with the pointless and purely semantic discussion of whether payments occur "at the beginning" or "at the end" of each period; and emphasizing the use of multiple-step problems.     

scholarly journals Teaching Time Value Of Money Using An Excel Retirement Model

2012 ◽  
Vol 5 (6) ◽  
pp. 663-676
Author(s):  
Fernando Arellano ◽  
Liz Mulig ◽  
Susan Rhame
Keyword(s):  
Financial Literacy ◽  
Model Building ◽  
Business Students ◽  
Real Life ◽  
Retirement Planning ◽  
Traditional Teaching ◽  
Time Value Of Money ◽  
Time Value ◽  
Traditional Teaching Methods ◽  
Value Of Money

The time value of money (TVM) is required knowledge for all business students. It is traditionally taught in finance and accounting classes for use in various applications in the business curriculum. These concepts are also very useful in real life situations such as calculating the amount to save for retirement. This paper details a retirement model that can be built during class to teach TVM. While traditional teaching methods give small pieces of the TVM picture, then exercises to reinforce that partial knowledge, this model incorporates many TVM techniques into one Excel modeling exercise. The model incorporates both TVM functions that are included in Excel and other formulas that must be entered into Excel by the student modeler. Unlike some other articles that focus on how much should be saved annually assuming a constant salary, this exercise focuses on a percentage of income to be saved. The model also addresses an assumed growth factor in the salary and the issue of inflation. This modeling tool is presented to adults in graduate level classes, so it incorporates the fact that they might already have some savings coming into this retirement planning exercise. This method of teaching TVM has several objectives. Primarily, the exercise contributes to the learning of TVM concepts and techniques. It also shows how the equations modeled here can be used to solve retirement planning questions, while contributing to the personal financial literacy of students, and improving model building skills in Excel.

scholarly journals Utilization of Cash Flow Ratios in Financial Management

2021 ◽  
pp. 8
Author(s):  
Keyword(s):  
Capital Structure ◽  
Cash Flow ◽  
Financial Management ◽  
Dividend Policy ◽  
Financial Analysis ◽  
Balance Sheet ◽  
Capital Budgeting ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management

Cash flow ratios are the ratios are calculated using balance sheet, income statement, and the statement of cash flow. The statement of cash flow is used to calculate all of the 28 cash flow ratios. These ratios may be used in financial management. The financial managers can utilize the ratios in especially the seven functions of the financial management. They are financial analysis, working capital management, capital structure, capital budgeting, dividend policy, leverage, and valuation. All of the cash flow ratios could be used financial analysis and working capital management functions of the financial management. 14 ratios in capital structure, 10 ratios in capital budgeting, 8 ratios in dividend policy, 8 ratios in leverage, and a ratio in valuation may be used.

scholarly journals Improving Pedagogy Through The Use Of Dynamic Excel Presentations In Financial Management Courses

2010 ◽  
Vol 3 (1) ◽  
pp. 91-106
Author(s):  
George A. Mangiero ◽  
John Manley ◽  
J. T. Mollica
Keyword(s):  
Capital Structure ◽  
Financial Management ◽  
Initial Conditions ◽  
Time Span ◽  
Excessive Amount ◽  
Financial Problems ◽  
Single Class ◽  
Time Value Of Money ◽  
Time Value ◽  
Value Of Money

This paper discusses and illustrates the use of dynamic Excel presentations to improve learning in Financial Management courses.  Through the use of such presentations, multiple and varied examples of important principles in Financial Management, which would ordinarily take an excessive amount of time to cover, can be considered within the time span of a single class.  Two applications of these techniques are presented in this paper: (1) Time Value of Money -- Classic Retirement Annuity analysis and (2) Capital Structure Decisions -- EBIT-EPS Analysis.  By using these Excel techniques to cover multiple examples under different initial conditions and assumptions, the authors contend that students gain a broader understanding of these financial problems and their solutions, than would otherwise be possible.

The Time Value of Money Concept in Islamic Finance

2006 ◽  
Vol 23 (1) ◽  
pp. 66-89
Author(s):  
Abu Umar Faruq Ahmad ◽  
M. Kabir Hassan
Keyword(s):  
Basic Element ◽  
Islamic Finance ◽  
Purchasing Power ◽  
Conventional Theory ◽  
Modus Operandi ◽  
Time Value Of Money ◽  
Time Value ◽  
Value Of Money ◽  
Future Date ◽  
Rule Out

The time value of money is a basic investment concept and a basic element in the conventional theory of finance. The Shari`ah does not rule out this consideration, for it does not prohibit any increment in a loan given to cover the price of a commodity in any sale contract to be paid at a future date. What is prohibited, however, is making money’s time value an element of any lending relationship that considers it to have a predetermined value. Here, the Shari`ah requires that a loan be due in the same currency in which it was given. The value (i.e., purchasing power) of paper currencies varies due to changes in many variables over which the two parties of a loan contract usually have no control. This study examines possible modus operandi of time valuation according to the Shari`ah’s precepts vis-à-vis the concept of money, and whether any value can be attributed to time while considering money’s value. For this purpose, it investigates the juristic views on such relevant issues as the permissibility of difference between a commodity’s cash and credit prices and an increase and reduction of the loan’s amount in return for early repayment.

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