MBA 621 Financial Management Lecture Notes

Flashcards covering key concepts from the MBA 621 Financial Management lecture notes.

Time Value of Money

The concept that money available today is worth more than the same amount in the future due to its potential earning capacity.

Simple Interest

Interest calculated only on the principal amount, or on that portion of the principal amount which remains unpaid.

Compound Interest

Interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods.

Future Value (FV)

The amount of money an investment will grow to over some period of time at a given interest rate.

Present Value (PV)

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Discount Rate

The interest rate used to determine the present value of future cash flows.

Annuity

A series of equal payments made at regular intervals over a specified period.

Perpetuity

A financial instrument that provides a cash flow indefinitely.

Growth Perpetuity

A perpetuity that increases its cash flows at a constant growth rate.

Amortization

The process of paying off a debt over time through regular payments.