MANAGERIAL ACCOUNTING

The time value of money refers to the fact that a dollar received today is more valuable than a dollar received in the future simply because a dollar received today can be invested to yield more than a dollar in the future.

Traditional capital investment techniques require a prospective investment to show value against the company's current operating position. This assumes the current position will continue as is. One method that does not make this assumption is the moving baseline concept.

What is the moving baseline concept? How does the baseline concept assist managers in making capital investment decisions? Why are those decisions crucial to investments?