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Welcome to the world of Corporate Finance, where we delve into the financial decisions that drive businesses and organizations in the real world. This course, "Real World Finance - Corporate Finance 101," is your gateway to understanding the fundamental principles and concepts that underpin financial decision-making in the corporate sector.
The concept of the Time Value of Money (TVM) is fundamental to finance and plays a crucial role in various financial decisions individuals and businesses make. At its core, TVM recognizes that the value of money changes over time due to the potential to earn interest or generate returns on investments. In essence, a sum of money today is worth more than the same amount in the future. Understanding TVM is vital for making informed financial choices, as it allows individuals and organizations to compare the worth of cash flows occurring at different points in time.
In the world of finance, understanding and estimating the cost of default is a critical component of risk management, especially for lending institutions, investors, and businesses. Default refers to the failure of a borrower to fulfill their financial obligations, typically related to debt repayment. Estimating the cost of default involves assessing the potential financial losses that can result from such defaults and developing strategies to mitigate these risks.