Monday, September 1, 2008

Present Value and Future Value

In Financial Reporting(F7), we have to learn many words associated with "Value".

First we have "carrying value", which is the value of an asset stated on the company's balance sheet. This is followed by many more; "fair value", "market value", "current value", "present value", "future value", etc. There might be more because I could not recall all of them right now.

Out of these "value" family members, what confuses me most is "present value" and "future value". Having little background knowledge in investment terms, these two words sometimes confuse me.

Luckily this article, "Understanding the time value of money" from clearly explains the meaning and the use of these two words. So if you are someone like me who has no knowledge of these basic things, read the above article here and you will see light at the end of it.

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