A sum of money is the total amount of a series of payments. It is used to calculate present value and future values of cash flows.
The value of a sum of money decreases with time. This is due to the time value of money and opportunity costs. If you invest a sum of money, it will earn interest over time. However, if you hide the money under your mattress for two years, it will have less buying power when you retrieve it because of inflation.
If you are offered the choice to receive a lump-sum payment or an annuity in the event of a lottery win, it is important to weigh the pros and cons of each option. Factors include income taxes, investment rates, state of residence when you win, and expected longevity. Often, it is better to take the lump-sum payment and invest it than to receive a smaller annuity payment each year.
A sum certain is an amount of money that is clearly stated in a contract or negotiable instrument at the time it is written. This eliminates any room for misunderstanding or misinterpretation of what is owed to the payee. This applies to both financial instruments and non-financial contracts, such as employment agreements or sales contracts. It can also apply to other types of assets, such as real estate or physical goods. Companies should regularly calculate their sum of money (SOM) to gain a better understanding of their financial standing. סכו״ם כסף