The time value of money can also be referred to as time preference for money.this, then, constitutes the rationale of considering time value of money in financial decision-making. The main reason for time preference for money is to be found in the re-investment opportunities for funds, which are received early. The funds so invested will earn a rate of return which or more popularly as a discount rate. The expected rate of return as also the time value of money will vary from individual to individual depending on his perception, among other things1.
The investment decision relates to the selection of assets in which can be acquired fall into two broad groups (i) long-term assets which will yield a return over a period of time in future, (ii) short-term or current assets defined as those assets which in the normal course of business are convertible into cash usually within a year.accordingly, the asset selection decision of a firm is of two types. The first of these involving the first category of assets is popularly known in the financial literature as capital bugeting.the aspect of financial decision-making with reference to current assets or short-term assets is popularly designed as working capital management 2.
Working capital management is concerned with ...Show more