You plan to borrow $ 2 comma 000 from a bank. In exchange for $ 2 comma 000 today, you promise to pay $ 2 comma 100 in one year. What does the cash flow timeline look like from your perspective? What does it look like from the bank's perspective?

Question

Business

Damari Mcintosh

Today, 18:33

You plan to borrow $ 2 comma 000 from a bank. In exchange for $ 2 comma 000 today, you promise to pay $ 2 comma 100 in one year. What does the cash flow timeline look like from your perspective? What does it look like from the bank's perspective?

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Answers (1)

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Skyler Russell · Answer 1

Answer:from my perspective, it is a linear representation of potential cash flow, while to the bank it is an outflow

Explanation:

Cash flow timeline is used to show the time value of money in relation to cash inflow and cash outflow resulting from the performance of business activities. In cash flow management, the rule is that cash inflow must be increasing while cash outflow must be reducing. A dollar today and a dollar in one year are not equal. Cash inflow is represented with a positive sign while cash outflow is represented with a negative sign

In the question + 2,000 today is a cash inflow, while - 2,100 is a cash outflow. Therefore

+2,000 - - 2,100

t=0. t = 1

From my perspective it is a linear representation of the timing of potential cash flow, while to the bank perspective it is an outflow