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h is fixed every year thus a pound received next year will have much less purchasing power than a pound received today.

To make this concept more clear let suppose that 100 pound is invested today in a bank with a return of 10% interest rate each year. At the end of year one the interest which will be paid for initial investment is 10 pound and the total amount will be 110 pounds. Therefore the value of 110 pounds to be received after a year is equivalent to the value of 100 pound received today.

Discounted cash flow are very useful techniques which is used in a wide variety of businesses. Mortgage loan are one of the best examples. Interestingly, DCF methods can also be used by Investors while purchasing companies stocks. In addition, Managers use this method to identify potential investment decisions or choose the best investment decision among several projects. The overall application of DCF methods is to convert future cash flows into present value by discounting these cash flows at the rate of company cost of capital. (Kern, Andy. 2010. The importance of DCF Valuation)

For example, we purchase a 20 year debenture on the day it issued on the market at face value price. So when we purchased this debenture, in fact we invested on this company and over the period of 20 years we expect to receive an amount greater than the value we purchased. Therefore, the value of this debenture today is calculated by discounting the value of principal and interest to be received over the period of 20 years. Or in other word, the value of today debenture equal to the sum of discounted value of interest and principal payment it will make over the 20 years.

Advantages of Discounted Cash Flow

It can be used to identify the value of a business as whole or also it can be used to determine the value of a specific project or component of a business that can be added to the overall value of business after conducting certain investments. It is simple and easy to calculate and understand. But it can be modified to deal with complex structure. In addition, both equity shareholders and investor can use this model to appraise investment. Investor can use DCF techniques to discount the value of shares or debenture in to current amount and calculate the amount of interest they earn over period of time. Meanwhile, companies can also use DCF method to evaluate investment decisions and make proper and sound investment in projects so that the value of the company is encouraged if the NPV or IRR is greater than cost of capital.

盈利能力VS流动性和流动资金管理来减少流动性问题（任务3）-Profitability VS Liquidity and Working Capital Management to Reduce Liquidity Problems (Task 3)

Liquidity and its importance for business survival:

Liquidity is generally referred to the ability of an entity to meet its short term obligation or in other word the ability of a company to convert assets into cash. The term short term is basically known as those obligation which matures within one year period of time. Short term is also sometimes regarded as operating cycle: buying, manufacturing, selling and collecting.

Liquidity is very much equally important for existence of a company. A company which cannot pay its creditor on time or cannot meet its short term expenditures will easily become insolvent or bankrupt. Moreover, companies operation and reputation will be i