Time Value of Money

The Time Value of Money (TVM) is a financial concept that suggests a sum of money today is worth more than the same amount in the future due to its potential earning capacity. This principle is based on the idea that money can earn interest or generate returns over time, meaning that waiting to receive money can lead to a loss of value. Essentially, receiving $100 today allows you to invest it and grow it, while $100 received in the future will not have the same purchasing power or investment potential. This concept underpins many financial decisions, including investments and loans.