Finance is the allocation of assets and liabilities (cash) keeping in mind the time and risks. Calculating finance is not an easy task but it can be made easier if we have the required data and exact Finance Formulas as well tools. Finance cannot be enclosed in four to five formulas but some of important commonly used formulas are:

Future Value Formula:
Future value is the expected value that is estimated keeping in mind the current present value. Future value formula is used to calculate the future value of original cash flow in present. Future value helps know the worth difference between the present and future values of a cash flow. Future value is denoted by FV, present value is denoted by PV, time by t and interest by i. it is calculated by two methods by simple and compound interest formulas.
Simple interest: FV = PV (i) (t)
Compound interest: FV = PV (1+i) t

Present Value Formula:
Present value is also known as the discounted value, it tells us the worth of future amount of money in current currency rates with adjustments of interests and inflation. In short it is comparability of buying power of one rupee in future to its today’s purchasing power. It is denoted by PV.
PV = FV/ (1+r) n

Annuity Formulas:
Annuity is the agreed or fixed amount of money paid to someone each year. Dealing with annuity we have to face two problems, obtaining future and present worth of an annuity.

Future value of Annuity:
The future value of annuity is the fixed payments done each year in future. It tells about the future returns as well as discounts.
FVA =PMT [(1+i) n-1/i]
Where, FVA= future value of annuity
PMT= payment per period

Present Value of Annuity:
The present value of annuity is the future payment of an annuity in current value. The cash flows of future annuity are discounted at a discount rate.
PVA =PMT [(1+i) n -1 / (1+i) n]

Net Present Value:
It is the difference between the present values of inflows and outflows of cash over a time period. It is usually used by project managers to evaluate the profitability and capital budgeting of a project.
NPV = (∑n t=1 net cash flows t / (1+r)) – initial investments
Where, r = discounted rates

Perpetuity:
Perpetuity values are used to find the present value of a company’s future project cash flow and the company’s terminal value.
Perpetuity = cash flows / interest rate or yields

Inflation ratio:
This formula tells the level of inflation an economy is facing. It is simply done using the consumer price index (CPI).
Inflation% = current CPI – initial CPI/Current CPI (100)

Basic growth rate:
It tells us about the progress of economy keeping in view initial value and present values.
Basic growth rate =present value-initial value/initial value (100)
Average growth rate = [(present value/initial value) ½

Views: 210

Comment by Zaheer Swati on June 13, 2019 at 3:06am

For more information about accounting, finance and economics, see below mentioned link:

http://www.accountancyknowledge.com

Comment

You need to be a member of PakAlumni Worldwide: The Global Social Network to add comments!

Join PakAlumni Worldwide: The Global Social Network

Pre-Paid Legal


Twitter Feed

    follow me on Twitter

    Sponsored Links

    South Asia Investor Review
    Investor Information Blog

    Haq's Musings
    Riaz Haq's Current Affairs Blog

    Please Bookmark This Page!




    Blog Posts

    Kashmir: Farooq Abdullah Lauds Pakistan's Diplomatic Support

    Speaking at an event in the Indian Occupied Kashmir, veteran Kashmiri leader Farooq Abdullah has lauded Pakistan's support for Kashmiris' rights. “They (Indian leaders in Delhi) are silent today because there is noise in the world, and our neighbor (Pakistan) is constantly behind this. Everywhere they say, ‘the decision regarding Kashmir has not been made’. That is what is saving us. Otherwise, their intentions are not good", he said.  He warned that Kashmiris risked losing their…

    Continue

    Posted by Riaz Haq on October 29, 2026 at 6:00pm — 1 Comment

    Can Pakistan Scale Up Affordable Energy Availability to Achieve Prosperity?

    Pakistan is currently classified as a lower middle-income country, with the ambition to become a high-income country. Its policymakers now recognize that no country has transitioned from middle-income to high-income status without generating substantial electricity at affordable rates. The link between energy and prosperity has been well-established since the advent of the Industrial Revolution. The AI Revolution has further reinforced it. Can Pakistan make the…

    Continue

    Posted by Riaz Haq on October 21, 2026 at 6:00pm — 10 Comments

    © 2026   Created by Riaz Haq.   Powered by

    Badges  |  Report an Issue  |  Terms of Service