Why do investors prefer receiving cash sooner rather than later, according to finance theory?
A) Incremental profits are greater than accounting profits.
B) Money received earlier can be reinvested and returns can be increased.
C) Tax considerations are important when investing.
D) Diversification leads to increased value.

Question

Quizplus · Accepted Answer

According to finance theory, receiving cash sooner rather than later is preferred because it allows for reinvestment and potential increases in returns. This concept is known as the time value of money, which suggests that a dollar today is worth more than a dollar received in the future due to its potential to earn interest or be invested. Therefore, investors prefer to receive cash sooner to take advantage of these potential returns.

Why Do Investors Prefer Receiving Cash Sooner Rather Than Later