Financial Management Formulas and Ratio Analysis
Cost-Volume-Profit (CVP) Analysis
- Contribution Margin (CM) per Unit = Selling Price − Variable Cost per Unit
- CM Ratio = (Selling Price − Variable Cost) ÷ Selling Price × 100
- Break-Even Units (BEU) = Fixed Expenses ÷ CM per Unit
- Break-Even Sales (BES) = Fixed Expenses ÷ CM Ratio
- Additional Units (AU) = Target Profit ÷ CM per Unit
- Total Units (TU) = BEU + AU
- Total Sales = TU × Selling Price
- Margin of Safety = Actual Sales − BES
Net Present Value (NPV) Analysis
- NPV = Σ (Cn × PV Factor) − Initial
Corporate Governance: Principles, Regulations, and Compliance
Meaning, Objectives and Principles of Corporate Governance
Corporate Governance is the system by which companies are directed and controlled. It provides a framework for achieving a company’s objectives while balancing the interests of shareholders, management, customers, suppliers, financiers, government, and society.
Core Objectives
- Ensuring management accountability
- Protecting minority shareholders
- Promoting transparency and ethical conduct
- Complying with laws and regulations
- Enhancing long-term shareholder
Essential Financial Formulas and Banking Metrics
Unit 1: Interest and Returns
- Simple Interest: I = P × i × t or I = P × i × days/360
- Final Value: FV = P + I or FV = P(1 + i × t)
- Compound Interest: FV = P(1 + i)^n
- Present Value: PV = FV / (1 + i)^n
- Period Return: Return = (FV – I0) / I0
- AER: AER = (1 + Return)^(360/days) – 1
Unit 2: Deposits, Loans, and Credit
Deposits
- Gross Interest: Igross = C0 × i
- Tax: Tax = Igross × tax rate
- Net Interest: Inet = Igross – Tax
- Net Final Amount: Cnet = C0 + Inet
- AER Calculations:
- General: AER = (1 + ik)^k – 1
- Monthly:
Accounting Principles and Financial Reporting Standards
1. Qualitative Characteristics of Accounting Information
Fundamental Characteristics
- Relevance: Information can influence decisions.
- Faithful representation: Information is complete, neutral, and free from material error.
Enhancing Characteristics
- Comparability: Helps users compare information across periods and entities.
- Verifiability: Information can be checked and confirmed.
- Timeliness: Available before it loses usefulness.
- Understandability: Clear to users with reasonable business and accounting knowledge.
Financial Accounting Systems and Standard Practices
Accounting Information Systems and Features
1. (a) What do you mean by an Accounting Information System? Outline the salient features of an accounting system.
Meaning of Accounting Information System (AIS)
An Accounting Information System (AIS) is a system that collects, records, stores, processes, and reports financial information of an organization. It combines accounting principles with information technology to provide accurate and timely financial information to management, investors, creditors,
Read MorePersonal Finance Essentials and Tax Basics
Essential Personal Finance Definitions
Core Financial Terms
- Needs – Something you cannot survive without.
- Fixed Expense – Money spent on something that remains about the same amount each month.
- Wants – Something that you desire.
- Variable Expense – An expense that fluctuates from month to month.
- Short Term – A period of up to six months.
- Risk – Taking a chance on losing all or part of something.
- Debit Card – A card that looks like a credit card, but the money is deducted directly from a checking