BUS 082 Lecture Notes - Lecture 4: Compound Interest, Balance Sheet, Interest

• School: College of The Sequoias
• Department: Business (BUS)
• Course: BUS 082
• Professor: Cordero

Document Summary

Real or productive assets: produce the cash flows over time. Financial or paper assets: claims on cash flows of productive assets. Balance sheet for finance: not concerned with past, what is value of the assets today, market value. The financial manager makes decisions about proposals with cash flows over long periods of time. An important decision is the timing of these cash flows. It is based on the fact that a dollar today is worth more than a dollar tomorrow. The time value of money must be recognised. Would you prefer m today or m in 5 years time. Gives a dollar amount in the future. Time value of money has its own language: Pv = present value, or principal i = interest rate, later we use r" n = number of periods, later we use t". This week, we learn about applications that require three variables to then determine a fourth.