What is the current value index?
, also known as the ratio of benefits, the current index of value is related to the relationship between the total costs associated with the acquisition and ownership of the asset and the net current value of this asset. The idea of calculating the ratio is to find out whether the investment is profitable or whether the investor is currently noticing a loss by continuing the possession of this asset. Investors often calculate the current index of value as a means of evaluating prospects for obtaining a specific asset, or even deciding whether to keep the ownership of an asset that is already part of the financial portfolio.
The calculation of the current value index (PVI) includes the identification of the current value of all expected profits or cash flows from this asset and then the distribution of this number plus any other costs associated with the ownership of the asset. If the result is a number that is more than the ratio of one, this means that the data used is likely to be profitable and worth securing.If the ratio is less than one, it is an indicator that the asset will probably cost more than any income over time, which will generate, which will eventually lead to a loss. With the latter situation, the investor would avoid buying well and focus his attention on another investment opportunity.
It is important to note that the value of the current value index is as good as the data used to calculate. This means that if the data is used to screen future income from the asset in some way, the resulting ratio will not be correct. As a result, the investor may assume that the asset is likely to be quite profitable when prospects are actually a more modest return or possibly a loss for a certain period of time.
Along with the use of the current value index to evaluate the potIFERENCE of the investment, businesses can also use the same approach to evaluate the prospects of KONCrete project. As with asset security, it is important to ensure that all data considered as part of the calculation are accurate and complete. If you do not do so, this may mean that the project eventually costs more than expected, or the project results do not provide the expected flow of income. In both scenarios, the project could eventually cause loss than to generate profits for society.