The term ‘discounts’ is a broad and varied meaning word when it comes to use in business. It literally has four distinct definitions. Each definition is used within a certain context of business. The first and most dollar expensive use is with original issue discount related to bonds in the market. The second use and most common is as an incentive in business.
Net Present Value
Net present value is a financial formula that refers to a value of cash flows from the future discounted at a set rate. The cash flows can be equal over time or have varying amounts. The key is that the cash received in earlier years has more value than cash well out into the future.