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Time Value of Money: A Core Concept in Financial Theory and Practice

Luca Bianchi

Received 20 Apr 2026, Published online: 31 Dec 2025

Published in Volume 5, Issue 2, 2025, pages 4-6

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Abstract

The Time Value of Money (TVM) is a foundational principle in finance that asserts a sum of  money today is worth more than the same sum in the future due to its potential earning capacity.  This paper examines the theoretical underpinnings, practical applications, and implications of TVM in financial decision-making. We explore its role in investment valuation, capital budgeting, personal finance, and corporate finance. Through a synthesis of literature and empirical evidence, the paper highlights how TVM influences decisions ranging from simple savings plans to complex financial derivatives, emphasizing the necessity of discounting future cash flows to present values. 

Keywords

  • Time Value of Money
  • Present Value
  • Future Value
  • Discounting
  • Interest Rate
  • Financial Decision-Making

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© 2025 Journal of Magnetism and Its Applications. This article is published under CC BY 4.0.

How to cite

Luca Bianchi , L. B. (2025). Time Value of Money: A Core Concept in Financial Theory and Practice. Journal of Magnetism and Its Applications, 5(2), 4-6.

How to Cite

Time Value of Money: A Core Concept in Financial Theory and Practice. (2025). Journal of Magnetism and Its Applications, 5(2), 4-6. https://jourmag.org/index.php/jma/article/view/136