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    Time value of money, unearned revenue

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    1) Would you rather have a hundred dollars today or a hundred dollars a year from now? Why?

    2) What are the underlying concepts behind time value of money?

    3) What are examples of long-term notes payable in our personal finances?

    4) Why is unearned revenue considered a liability?

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    Solution Preview

    Use has been made of material at the following sites in framing the answers:
    http://money.zezenetwork.com/articles/time_value.htm

    1) Would you rather have a hundred dollars today or a hundred dollars a year from now? Why?

    I would rather have a hundred dollars today rather than hundred dollars a year from now.
    This is because:
    1) A hundred dollars is worth more today than a year from now. I can buy more using a hundred dollars today than I would be able to buy using a hundred dollars from now. Because of inflation the prices rise. Therefore something that costs a hundred dollars today would cost more than a hundred dollars from now.
    2) I can invest a hundred dollars if I have them today. I would earn a return on my investment as a result of which I would have more than a hundred dollars in a year from now.
    3) There is no risk in having the hundred dollars today. Because of some changes in circumstances the hundred may not materialize in a year's time. I may eventually get less than a ...

    Solution Summary

    Answers 4 short answer questions in corporate finance.

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