Time Value Of Capital

The time value of capital refers to the difference of the value of a certain amount of funds at different time points.

The time value of capital is generated by circulating funds, and it is a kind of distribution of social wealth allocated by the owner of the fund to transfer the right to use the funds. form 。 For example, if we put 100 yuan into the bank today, we will generate 110 yuan a year after the annual interest rate is 10%. We can see that after a year, the value of the 100 yuan has increased by 10 yuan.

The phenomenon of increasing value of capital in the course of use over time is called the attribute of time value of capital.

The time value of capital is an objective existence. Economics The introduction of the concept of capital time value in the financial management of enterprises is a necessary guarantee for improving financial activities and raising the level of financial management. The time value of capital can be measured from two aspects: theoretically, the time value of capital is equivalent to the social average profit margin without risk and without inflation. Actual On the other hand, when inflation is very low, the time value of funds can be expressed by the interest rate of government bonds.