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Business Math Definitions and Formulas

Discounts and Markdowns 

N = L ( 1 - d )

      [Net Price = List Price (1 - discount rate %)]

      [or Sale Price = Regular Selling Price ( 1 - MD%]

      [or Old Price - New Price ( 1 - MD%)]

     

N = L - D

      [Net Price = List Price - Discount Amount $]

 

D = Ld

      [Net Price = List Price x discount rate %]

 

Markup

M$ = E + P

        [Markup $ = Expense = Profit]

M$ = M% x P

        [Markup $ = Markup % x Price]

M$ = S - C

        [Markup $ = Selling Price - Cost]

S = C + M

        [Selling Price = Cost + Markup $]

Markup of Cost Price = M/C

        [Markup of Cost Price = Markup Value $ / Cost Price]

Markup of Sale Price = M/S

        [Markup of Sale Price = Markup Value $ / Sale Price]

Invoices Discount periods

ROG  -  discount period starts after receipt of goods

EOM  -  discount period starts the end of the month

Amount Paid = Amount Credited ( 1 - discount rate%)

Amount Credited = Amount Paid / ( 1 - discount%)

Invoice Balance = Invoice Amount - Amount Credited

2/15, n/60 ROG

[discount rate/length of discount time period, total due date & type of discount period]

Interest and Principal

I = Prt;        P = I / (rT)        r = I / (Pt);        t = I / (Pr)

[Interest = Principal x rate x time]

[time is always per year, i.e. / 12 mths, / 365 days, / 52 wks]

T = P + I

[Total Amount Due = Principal + Interest]

Compound Interest

S = P(1 + i )ⁿ

[S = future value; P = Principal;

 I = interest rate for the time period;

 n = number of periods]

P = S( 1 + i )‾ⁿ

i = j / m

[j = per annum (p.a.) interest rate;

m = number of periods per year]

Equality (i.e focal date questions)

FV = PV (1 + i )ⁿ

[use of the due date is earlier than the focal date]

PV = FV(1 + i )‾ⁿ

[ use of the focal date is earlier than the due date]

n = the number of periods between the due date and the focal date

i = j / m [same as in the compound interest questions]

Original Simple Annuity

Sn = R [( 1 + i )ⁿ - 1 ]

                  i

[R = size of periodic payments]

[Sn = future/maturity value; make sure Sn is the future or maturity value and not the original amount of money borrowed or invested]

An = R [ 1 - ( 1 + i )ⁿ ]

                   i

[An = present value of the annuity, i.e "in today's dollars']

[R = size of the periodic payments]

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