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Financial Intelligence for Entrepreneurs: What You Really Need to Know About the Numbers by Joe Knight, Karen Berman

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23

The Building Blocks of ROI

Financial intelligence is all about understanding how the financial side of business works and how financial decisions are made. The principles discussed in this chapter are the foundation of how some decisions—those relating to capital investment—are made in a business.

Most of us need little introduction to the fundamental principle of finance known as the time value of money. The reason is that we take advantage of it every day in our personal finances. We take out home mortgages and car loans. We run up big balances on our credit cards. When the debt gets too high, we refinance. Meanwhile, we’re putting our own savings into interest-bearing checking or savings accounts, money-market funds, treasury bills, and ...

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