Formulas for Finance and Accounts

Accounts and Finance are two of the most important subjects of the management subjects. Both of these subjects are interrelated with each other and at the same time they are different from each other. While finance is the art and science of funds management, accounts is the art and science of recording financial transactions over a period of time.

Finance and Accounts are both dependant on many tools, techniques, formulas and formats. One important point, we must remember is that, not all companies follow the same rules and regulations while maintaining their accounts and managing finance. While most companies are governed by the respective Companies Laws or Acts in their respective countries, they still have freedom to choose their own style of accounts maintenance and financial management.

Finance is mainly dependant on tools and formulas. These tools, techniques and formulas have been developed over the years and they form a basis for today’s world of finance. These tools and formulas determine the outcome of a financial investment made by a concern.

Today’s finance is more about analysis. There can be many ways to invest funds and it is the responsibility of the financial officer to determine the best possible way for investing the funds of shareholders. The investment thus made must bring about highest returns in comparison to others. In order for this to happen, financial officers or managers have to depend upon certain tools, techniques and formulas to determine the best possible investment in terms of returns.

Some of the formulas used in finance include

• Future Value of Annuity

Future Value of Annuity = P [(1+ r)ⁿ – 1/r], where

P = Periodic payment, r = rate per period, n = Number of periods

• Present Value of Annuity

Present Value of Annuity = P [1-(1+r)^-n/r], where

P = Period Payment, r = rate per period, n = Number of periods

• Future Value of Annuity Due

Future Value of Annuity Due = (1+r) × P [(1+r)ⁿ– 1/r], where

P = Period Payment, r = rate per period, n = Number of periods

• Future Value of Growing Annuity

Future Value of Growing Annuity = P[(1+r)ⁿ – (1+g)ⁿ/r-g], where

P = First Payment, r = rate per period, g = growth rate, n = number of periods

• Present Value of Growing Annuity

Present Value of Growing Annuity = [P/r-g] [1- (1+g/1+r)ⁿ], where

P = First Payment, r = rate per period, g = growth rate, n = number of periods

These are some of the formulas which are used in finance. We will discuss more about formulas in finance in our coming blogs.For more help Financial Management, you can visit our website at https://www.helpwithassignment.com

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