Lecture Notes on Time Value of Money Concepts

These flashcards cover key vocabulary and concepts related to the time value of money, financial instruments, and their accounting treatment.

Time Value of Money

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

Cash Flows

Money that moves in and out of a business, categorized as a single sum (1 payment) or annuity (multiple equal payments).

Annuity

A series of equal payments made at regular intervals over time.

Future Value

The total value of a cash flow or series of cash flows at a specified time in the future, including interest.

Present Value

The current worth of a cash flow or series of cash flows, discounted at a specific interest rate.

Ordinary Annuity

An annuity where payments are made at the end of each period.

Annuity Due

An annuity where payments are made at the beginning of each period.

Deferred Payment

A payment that is due at a future date, rather than immediately.

Present Value of a Single Sum

The current value of a future sum of money based on a specified interest rate.

Future Value of Ordinary Annuity

The total value of a series of future payments including interest, at a specified date.

Present Value of Ordinary Annuity

The current worth of a series of future payments at a specified interest rate.

Notes Receivable

A written promise for amounts to be received, often with interest.

Notes Payable

A written promise to pay a certain sum of money to a specific party at a future date.

Bonds Payable

A long-term liability representing money borrowed by a company that must be repaid in the future.

Lease Obligation

The liability associated with a leasing agreement, representing future payments due.

Amortization Schedule

A table detailing each periodic payment on a loan or lease, showing principal and interest portions.