Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

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Multiple Choice

How can the concept of future value be used to assess the worth of employee benefits such as retirement plans or deferred compensation?

By comparing the benefits to the company's current cash flow.

By calculating the amount that current benefits will grow to over time using a specified interest rate.

By determining the present cost of providing employee benefits today.

By estimating the total tax liability associated with employee benefits.

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Verified step by step guidance

Understand the concept of future value: Future value refers to the amount of money an investment or benefit will grow to over a specified period of time, given a certain interest rate. It helps assess the worth of benefits by projecting their value into the future.

Identify the employee benefits to be assessed: Examples include retirement plans, deferred compensation, or other long-term benefits. These benefits often involve payments or contributions made today that will grow over time.

Determine the interest rate and time period: To calculate the future value, you need to know the interest rate (or growth rate) and the time period over which the benefits will grow. These factors are critical in projecting the future worth of the benefits.

Apply the future value formula: Use the formula \( FV = PV \times (1 + r)^n \), where \( FV \) is the future value, \( PV \) is the present value (current benefits), \( r \) is the interest rate, and \( n \) is the number of periods. This formula helps calculate how much the current benefits will grow to over time.

Interpret the results: Once the future value is calculated, it can be used to assess the worth of employee benefits in terms of their future financial impact. This helps in making informed decisions about the cost and value of providing these benefits today.