Discussion #2 | Accounting homework help

Please respond to 2 peers

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper

My Intial post  

Interest rates in common parlance refers to the cost of capital i.e. some portion of principal amount which is charged by the lender from the borrower. Some of the key components of interest rates are given below:-

  • the Real rate of interest: This is the first element of interest rate. as we are aware of the fact that nothing is free in this world. everything bears some cost. Likewise, the real interest rate is nothing but the cost of capital charged by the lender of the money.
  • Inflation differentials: Inflation simply means a general increase in the price level of the goods and services in the economy. Inflation has a huge impact on the interest rates. The increase in Inflation leads to increase in interest rates and vice versa.
  • Credit risk : Credit risk refers to the risk of default or non-payment of a loan or due amount. Like in the case of equity, credit risk is high but vice versa in case of government securities.

For an accountant, it is very essential to understand all the components of interest rates due to the following reasons:-

  • Real interest rate: From real interest rate, an accountant can determine interest coverage ratio in order to determine the long-term solvency of the company.
  • Inflation: From inflation, an accountant have to make a technical estimation of different kinds of functional budgets like the cost of raw material, wages of labor and cash flows etc.
  • Credit Risk: From credit risk premium, the accountant can come to know about the liquidity as well as solvency position of the company. Even it is helpful in the creation of a provision for doubtful debts.

Peer1 

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper

The time value of money is the principle that 1 dollar today is worth more then 1 dollar tomorrow.  It is also the fundamental and guiding principle behind almost every financial and investing decision.  It helps you evaluate and assess future risks and decisions.  Basically, TVM is not just letting money sit in your pocket and burn a hole, it can be put to work – that may be investing in real estate, certificates of deposit or stocks as examples of how to make each dollar worth more in the future.

Several important terms and pieces factor into determining the time value of money in the future.  There is present value, there is interest or return, there is the number of years invested and there is the number of years of compounding interest (Lusk, 2021).

There are several components of interest.  Two common types of gained interest are simple and compounding interest, one that accumulates with the interest earned each year, and simple which is the interest from the principle paid each year.  A third one is termed as accrued. 

Accountants must have a good understanding when balancing, and budgeting for the future.  One simple mistake can make or break the financial decision making process – it can be the difference between being under, at or above budget.

Lusk, Veneta.  (2021).  Time value of money: The guiding principle for virtually every financial and investing decision.  Business Insider.  https://www.businessinsider.com/time-value-of-money

Peer2 

The time value of money is a concept that helps us to understand how the value of our money changes over time. This change can go in either direction, up or down, and is affected by things like inflation, interest rates, and the total time span in consideration. Time value concepts can help us determine the value of an investment made today of a specific amount at a specified interest rate, for a future point in time. The same holds true for the reverse, if we need to know how much to invest today in order to have a specific amount in the future, time value helps us get there.

When thinking about interest rates it is important to understand that at the most basic level interest is the cost of borrowing money for the borrower and the potential income from lending the money to the lender. There are 3 components within interest rates. The first is the real interest rate, which is the return the lender wants for lending their funds. The second component is inflation, due to the fact that over time the purchasing power of a dollar tends to decrease. Therefore this must be factored into interest rates so that lenders receive an adequate return. The third component of interest rates is risk or risk premium. This takes into consideration the possibility that the lender may not get repaid the funds they have loaned. Therefore the risk premium associated with interest rates will vary from case to case, depending on things like creditworthiness, income, and collateral.

It is important for accountants to understand the components of interest rates because each of these factors plays a role in understanding financial statements and making decisions regarding finances. For example, if inflation has just seen a sharp rise, and your client has a significant amount of debt relative to equity on the books, you may not recommend financing a new purchase, as the interest rate charged will be much higher, than if they could wait until they have paid down some of the debt, and/or inflation has decreased, paving the way for a lower interest rate.

“Time Value Of Money”. CFI, 2022, https://corporatefinanceinstitute.com/resources/knowledge/valuation/time-value-of-money/ (Links to an external site.).

Hofstrand, Don. “Understanding The Components Of An Interest Rate”. Iowa State University Extension And Outreach, 2022, https://www.extension.iastate.edu/agdm/wholefarm/html/c5-94.html (Links to an external site.).

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

It's no longer good enough to create a high-quality product at a reasonable cost.
That is why we have created 9 compelling warranties to make your usage of our service pleasant, simple, and secure.

Money-back guarantee

You must be completely confident in the quality of your products in order to provide a money-back guarantee. This is precisely how custom paper writing services work. We double-check that there are no hidden issues with this promise and that you are completely happy with the quality of your purchase.

Read more

Zero-plagiarism guarantee

Our writers do not employ others’ writing tricks, because we are aware that plagiarism may cost a lot to our clients and take away their reputation.

Read more

Free-revision policy

We want you to be satisfied with your order, so we offer a free revision policy. If you are not completely happy with your order, let us know and we will revise it for free.

Read more

Privacy policy

We care about our customers and always strive to keep their trust. That’s why Customwritingspapers.com guarantees privacy and safety of your personal information. To ensure total security, we take the following measures:

Read more

Professional Editors

Our team of editors works tirelessly to ensure that all papers meet our high standards for quality. They check for the instructions, grammar, punctuation, and spelling mistakes as well as for plagiarism.

Read more

Fair-cooperation guarantee

We would never want to jeopardize our relationship with you, and that is why we offer a fair-cooperation guarantee: If for any reason you are not satisfied with your order, you can always get your money back.

Read more

Professional Writers

We only hire the best, most qualified professionals to work on your order. Each writer is a degree holder with extensive experience in their field. You can be assured that your project will be handled by a true expert.

Read more

Quality Control

Our quality assurance department ensures that each paper is of excellent quality before it is sent to you. You can be sure that your paper will meet all of the requirements that you set. Our experts are highly skilled and will follow your specific instructions to the letter.

Read more

Customer support

We have a highly professional and qualified customer support team that is available 24/24, 365 days a year. They will be more than happy to answer any questions or concerns that you may have about our company or products. You can contact them by phone, email, or chat on our website.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Open chat
1
Order through WhatsApp!
customwritingspapers.com
Hello!
You Can Now Place your Order through WhatsApp

Order your essay today and save 30% with the discount code DISCOUNT2022