Explain Why a Dollar Today Is Worth More Than a Dollar

question 10

Essay

Explain why a dollar today is worth more than a dollar tomorrow.

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Definitions:

Inventory

The goods and materials a business holds for the ultimate goal of resale or utilization in production.

Quick Ratio

A liquidity ratio measuring a company's ability to meet short-term obligations with its most liquid assets, excluding inventories.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.

EBITDA Coverage Ratio

Similar to the times-interest-earned ratio, but it recognizes that many firms lease assets and also must make sinking fund payments. It is found by adding earnings before interest, taxes, depreciation, and amortization and lease payments, then dividing this total by interest charges, lease payments, and sinking fund payments over 1 minus the tax rate.