What are the financial management concepts?

The basic concepts that should be established in enterprise financial management include the time value and risk value of funds. The time value and risk value of funds are objective economic categories, which run through the financial management process of modern enterprises.

(1) The time value of capital, also known as the time value of money, refers to the increased value of capital after a certain period of investment and reinvestment. In terms of quantity, the time value of funds is the average profit rate of funds under the conditions of no risk and no inflation, which helps us to establish the concept of capital cost, attach importance to investment benefits and improve the efficiency of capital utilization.

(2) Value-at-risk, also known as risk reward, refers to the extra reward that exceeds the time value of funds required for investment to take risks. The aversion to risk determines that investors are willing to invest in risk only if they get extra risk reward, and the greater the risk they take, the higher the risk reward they require.