Browse Definitions :
Definition

time value of money

Time value of money is the concept that money acquired sooner or held onto longer has a greater worth or potential worth due to the possible accumulation of interest or ROI while that money is saved or invested.

Time value of  money is often used to improve the precision of financial calculations within the enterprise, as part of IT asset management, enterprise resource planning (ERP),  decision management and cost/benefit analysis, for example.

When money is acquired earlier and/or held longer, it has the potential to increase through investment or interest, among other possibilities. Time value of money quantifies this potential and contrasts the greater potential value of a sum of money received or invested earlier with the value of the same sum received or invested later.

Anytime a sum of money is invested or saved in an account that yields interest, the time value of the money is being exploited. Time value of money is also often considered in situations where an individual or business has multiple options. For example, there may be an option to get a particular sum immediately or to get a more substantial sum at a later date. Quantifying and comparing the potential value of both sums at some future date can make it easier to make an informed decision.

Normalized practices such as charging in advance for services, such as Internet or phone, and paying in arrears allow businesses to profit from time value of money.

See also: net present value (NPV)

This was last updated in August 2015

Continue Reading About time value of money

SearchCompliance
  • OPSEC (operations security)

    OPSEC (operations security) is a security and risk management process and strategy that classifies information, then determines ...

  • smart contract

    A smart contract is a decentralized application that executes business logic in response to events.

  • compliance risk

    Compliance risk is an organization's potential exposure to legal penalties, financial forfeiture and material loss, resulting ...

SearchSecurity
  • biometric verification

    Biometric verification is any means by which a person can be uniquely identified by evaluating one or more distinguishing ...

  • password

    A password is a string of characters used to verify the identity of a user during the authentication process.

  • biometrics

    Biometrics is the measurement and statistical analysis of people's unique physical and behavioral characteristics.

SearchHealthIT
SearchDisasterRecovery
  • What is risk mitigation?

    Risk mitigation is a strategy to prepare for and lessen the effects of threats faced by a business.

  • change control

    Change control is a systematic approach to managing all changes made to a product or system.

  • disaster recovery (DR)

    Disaster recovery (DR) is an organization's ability to respond to and recover from an event that affects business operations.

SearchStorage
  • PCIe SSD (PCIe solid-state drive)

    A PCIe SSD (PCIe solid-state drive) is a high-speed expansion card that attaches a computer to its peripherals.

  • VRAM (video RAM)

    VRAM (video RAM) refers to any type of random access memory (RAM) specifically used to store image data for a computer display.

  • virtual memory

    Virtual memory is a memory management technique where secondary memory can be used as if it were a part of the main memory.

Close