Sole Important Parameter in Today’s Financial Systems: Interest Rates
The use of financial management relies heavily on the prevailing interest rates. De facto norms in today’s financial system poses that the valuation of virtually everything from real estate to commodities, from investment instruments to cash flows is a function of the prevalent rate of return. Rate of return with a certain period underlies and determines the worth of, say, a future investment project. Because a rational investor makes decisions based on considerations of the current (present) value of an estimated future cash flow, the computation of such numbers are of great motivation and insight for decision mechanisms in businesses and other organizations as well.