In one sentenceThe amount today's money will grow to after a given period if invested at a specified return, with the return reinvested each period.
Simply put
If you put 100,000 SAR in an investment that earns 5% a year, it will not stay 100,000. Future value answers: how much will it be after three years?
You use it when planning for an upcoming goal: how much you need to save today to buy equipment in two years, or what the business's reserve will become in five years.
Worked example
A workshop owner invests 100,000 SAR for 3 years at an expected return of 5% a year (a hypothetical rate for illustration), reinvesting the return every year.
After the first year100,000 × 1.05 = 105,000 SAR
After the second year105,000 × 1.05 = 110,250 SAR
After the third year110,250 × 1.05 = 115,762.50 SAR
Future value = 100,000 × (1.05)^3115,762.50 SAR
Formula: Present amount × (1 + return)^number of periods
Don't confuse it with
Present valueThe reverse operation: you start with a future amount and ask what it is worth today.