The concept of the time value of money (TVM)
This is your opportunity to play detective and do some financial statement analysis. Please select any publicly traded company.
For the company you select, find the annual report and the financial ratio information for the following ratios:
debt-to-equity,
current ratio,
return on equity,
quick ratio,
working capital ratio,
price earnings ratio, and
earnings per share.
Once you have reviewed the information, with a brief introduction to your chosen company. Next, explain how the company is doing with respect to the ratios. In one to three sentences, briefly summarize what each of the ratios are telling you about the company. Conclude with how you predict it will do in the future.
Your should be at least one page in length
Part Two Case Study:
Choose a publicly traded company that issues bonds. You can locate this information by reviewing your chosen company’s annual report online. A good place to start is the Annual Reports website.
In your case study, discuss the following aspects of the company.
1. Provide a brief introduction of the company, including its name, headquarters, products/services offered, and approximate net worth.
2. What are the key features of one of the bonds issued by your chosen company? Discuss how the bond’s terms and collateral can affect the bond’s interest rate.
3. How would a potential investor determine the value and risk of the bond?
4. Explain the concept of the time value of money (TVM) as it applies to the company’s bond offerings.
The time value of money (TVM) is the concept that a sum of money is worth more now than the same sum will be at a future date due to its earnings potential in the interim. This is a core principle of finance. A sum of money in the hand has greater value than the same sum to be paid in the future. Investors prefer to receive money today rather than the same amount of money in the future because a sum of money, once invested, grows over time. For example, money deposited into a saving account earns interest. Over time, the interest is added to the principal, earning more interest. That is the power of compounding interest.
