financial formulas
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Aggressive financing Plan
 High Risk/Profit
 Low Liquidity/Short term financing

Conservitive Financing Plan
 Low Profit/Risk
 Long Term financing/High Liquidity

Moderate financing plan
 Moderate Profit/Risk
 Short term financing with High Liquidity
 or
 Long term financing with Low Liquidity

% of Working Capital
 (current assets  Current Liabilities)
 divided by
 Sales

Cost of failing to take cash discount
 Discount %/(100%  discount %)
 times
 360/ (final due date  discount period)

Effective Rate Reg Loan
 interest/principal
 times
 days in the year (360)/ days outstanding on loan

Effective Rate Discount Loan
 interest/(principal  interest)
 times
 days in the year(360)/days outstanding

Effective rate w/ compensating balance (given rate)
stated rate/(1% compensating balance)

Effective rate with compensating balance (given $$ amounts)
 interest/(principal  compensating balance in $)
 times
 year (360)/days loan outstanding

effecitve rate on installment loans
 (2 X annual # of payments X interest)
 divided by
 (total # of payments +1) times principle

Ratio of bad debt to credit sales
$ of bad debt loss/$ of credit sales

sales to ar turnover
sales/turnover

ROI for credit decision
 I is AR so
 net income/ AR

Economic Order Quantity (EOQ)
 sqrt ((2*S*O)/C)
 S is sales in units
 O is ordering cost
 C is carrying cost per units


Average inventory with safety stock
(EOQ)/2 + Safety stock

Total cost for inventory
 Order costs = units sold/order size
 Carrying cost  Avg inv in units X carrying cost per unit
 order cost + carrying cost

future value  single amount
 FV = PV X FVif
 FV = PV X (1+i)^n
table future value of $1

present value  single amount
 PV=FV X PVif
 PV = FV X (1/(1+i)^n)
table present value of $1

future value  annuity
 FVa=A(FVifa)
 FVa = A[((1+i)^n1)/i]
future value of annuity

Present value  annuity
 PVa=A(PVifa)
 PVa = A[(1(1/(1+i)^n)/i]
table present value of annuity

annuity equaling a future amount
 A = FVa/((1+i)^n1)i)
 A = FVa/FVifa
table future value of annutiy

annuity equaling a present value
 A=PVa/(1(1/(1+i)^n))/i
 A=PVa/PVifa
table present value of annuity

how to figure annuity when more than one payment/investment in a year
 n = number of years X # of compunding periods per year
 i = annual interest rate/# of compounding periods in a year