This glossary uses Visual Finance™ to bring financial terms to life. Each example shows data from the Round Number Company, a fictional business with simplified figures to make learning easier. For more details, visit 'How to Read Visual Finance'.
NPV is used to determine when, if ever, a capital investment will generate a profit, and how much that will be in today’s terms. Cash Flows of future years are discounted because ‘cash next year’ is worth less than ‘cash this year’ for a variety of reasons (inflation, risk, etc.). See for example, this NPV Calculator.
The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"
term list.