Finance / July 7, 2018 / Alianna Dominguez
For some businesses, like restaurants and some retailers, cash is really cash - currency and paper money. The business takes cash from customers and sometimes pays its bills in cash. Cash businesses have a special issue with keeping track of cash flow, especially since they may not track income unless there are invoices or other paperwork.
The future value of annuity due formula calculates the value at a future date. The use of the future value of annuity due formula in real situations is different than that of the present value for an annuity due. For example, suppose that an individual or company wants to buy an annuity from someone and the first payment is received today. To calculate the price to pay for this particular situation would require use of the present value of annuity due formula. However, if an individual is wanting to calculate what their balance would be after saving for 5 years in an interest bearing account and they choose to put the first cash flow into the account today, the future value of annuity due would be used.
We Also Think You’ll Like