I am new to the stock market and currently trying to just get a basic understanding of the stock markets using online sources (investopedia).
I came across this sentence when I was reading on a topic about the representation of a company's value. And I don't quite understand what it meant.
"Because of the time value of money, profits to be earned in the future must be discounted back to represent today’s dollars – just as a dollar put into a bank account today will be worth more in the future after it has earned some interest, but in reverse."
Can someone please clarify this sentence? Why do profits earned in the future must be discounted back to represent today's value (whatever this means)?
Thank you. (Link to this website --> https://www.investopedia.com/university/stocks/stocks7.asp) The sentence is located at the start of the 4th paragraph.