What is the discounted cash flow concept, and why is it essential for financial managers to understand and employ this important concept?

Discounted cash flow is one of the most important tools that financial managers have to use when assessing the value of business projects, investments and other types. DCF calculates the future value of cash flow generated by an investment and subtracts any costs to arrive at its total worth. This method helps financial managers make more informed decisions since it takes into account both short-term and long-term effects when evaluating potential investments.One of the main advantages DCF is that it allows for comparisons between different assets – meaning more well rounded insights can be obtained by looking at all available options side by side before picking one out best fits needs. This method also takes into account the time value of money, meaning that money earned today is worth more tomorrow than it was yesterday due to its interest rates and earning potential.

Financial managers should understand DCF because it not only provides them with quantitative information to help them in their decision-making process, but also allows them the opportunity to analyze different scenarios without emotions clouding judgment. This will allow them future investments that are more sound!