At first glance, finance can seem like a collection of unrelated decision rules. Nothing could be further from the truth. The logic behind the financial concepts covered in this textbook arises from five simple financial principles, each of which is described next.
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Essential Financial ConceptsA dollar received today is worth more than a dollar received in the future. Conversely, a dollar received in the future is worth less than a dollar received today.
Perhaps the most fundamental principle of finance is that money has a time value. A dollar received today is more valuable than a dollar received one year from now. That is, we can invest the dollar we have today to earn interest so that at the ...
