When financial managers compare cash flows that occur at different times, they should take the time value of money into account.

Question

Quizplus · Accepted Answer

Financial managers must account for the time value of money when comparing cash flows that occur at different times. The time value of money refers to the idea that a dollar received in the future is worth less than a dollar received today due to inflation and the potential for earning interest. Therefore, to accurately compare cash flows, financial managers must adjust for the time value of money by discounting future cash flows to their present value.

When Financial Managers Compare Cash Flows That Occur at Different