Question

A research paper or an abstract for finance. "How significant it is to understand cash flow and time value of money?"

Answer 1

Understanding of cash flow is one of the important concepts in finance as the same would accomplish everything you want in life. Cash Flow describes the flow of money in your business and it also describes the flow of money out of your business in form of expenses. One can manage positive cash flow only if flow of money inward is higher than flow of money outward and this could only be possible if you have higher amount of money flowing inward as compared to that flowing outward. Cash Flow could only be increased either by making more money or by controlling one's expenses.

Similarly Time Value of Money is another important concept in finance as the same describes dollar value today as well as in near future i.e. dollar in hand today is worth more than a dollar promised in future. A dollar in hand today is used to invest or earn interest or capital gain. A dollar promised in future is actually worth less than a dollar today because of inflasion. One of the core principles of finance says that any amount of money is worth more the sooner it is received. Also Time Value of money states that keeping everything equal, it is better to have money now than later.