Cash Flow Statement
A Cash Flow Statement (CFS) is a vital financial report. It shows how much actual cash enters and leaves a business during a specific time. In simple terms, it tracks the movement of physical money. This is different from a Profit and Loss account. A company might show a profit but still have no cash in the bank. For example, if a shop sells goods on credit, it records a sale but receives no cash immediately. The CFS helps us understand if a business can pay its bills on time.
Concepts (3)
Future Value is the amount an investment will grow to after a period at a specific interest rate. This process is called compounding. It helps bankers calculate the maturity value of a fixed deposit.
Future Value is the amount an investment will grow to after a period at a specific interest rate. This process is called compounding. It helps bankers calculate the maturity value of a fixed deposit. Example: If you save ₹1,000 today at a 5% interest rate, your money will grow to ₹1,050 next year. Here, ₹1,050 is the FV.
An Ordinary Annuity involves payments at the end of each period (like a salary). An Annuity Due involves payments at the start (like an insurance premium). Since money is paid earlier in Annuity Due, it earns interest for one extra period.
An Ordinary Annuity involves payments at the end of each period (like a salary). An Annuity Due involves payments at the start (like an insurance premium). Since money is paid earlier in Annuity Due, it earns interest for one extra period. Example: A typical loan EMI is an Ordinary Annuity, while a pre-paid mobile plan acts like an Annuity Due.
Present Value tells us the current worth of a sum of money to be received in the future. It is based on the idea of discounting. If you need ₹1,000 after two years, PV tells you how much to invest today.
Present Value tells us the current worth of a sum of money to be received in the future. It is based on the idea of discounting. If you need ₹1,000 after two years, PV tells you how much to invest today. Example: If you want ₹110 in a year and the interest rate is 10%, you need to invest ₹100 today. Thus, the PV is ₹100.
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