ABSTRACT
The idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. The value, of cash or cash flows to be received in the future, is called net present value, abbreviated as NPV. One finance formula that does acknowledge the value of time is NPV. Present value is simply the sum of a series of cash flows over time in terms of present dollars. The important concept is to look closely at the time line, from the point the order is received to the point where the cash is collected. Any reduction in this time line will improve customer responsiveness and cash flow at the same time.
