Finance & Business formule
Compound interest, present value, annuities, loan amortization, and investment formulas.
Compound Interest Formula
A = P(1 + r/n)^(nt)
Calculates the future value of an investment or loan with compound interest — where interest earns interest on itself over time.
Simple Interest Formula
I = P × r × t
Calculates interest earned on the original principal only — interest does not compound.
Present Value Formula
PV = FV / (1 + r/n)^(nt)
Determines how much a future sum of money is worth in today's dollars, accounting for the time value of money.
Net Present Value (NPV)
NPV = Σ Ct / (1+r)^t
Evaluates the profitability of an investment by summing the present values of all future cash flows. A positive NPV means the investment creates value.
Mortgage Payment Formula
M = P × [r(1+r)^n] / [(1+r)^n - 1]
Calculates the fixed monthly payment for a fully amortizing loan, where each payment covers both interest and principal.
Rule of 72
t ≈ 72 / r
A quick mental math shortcut to estimate how many years it takes for an investment to double at a given annual rate of return.
Debt-to-Income Ratio
DTI = (Total Monthly Debt / Gross Monthly Income) × 100
Measures the percentage of your gross monthly income that goes toward paying debts. Lenders typically want DTI below 43% for mortgage approval.
Break-Even Point Formula
BEP = Fixed Costs / (Price - Variable Cost per Unit)
Determines the number of units a business must sell to cover both fixed and variable costs — the point where total revenue equals total cost.
Profit Margin Formula
Margin = (Revenue - Cost) / Revenue × 100
Measures what percentage of revenue remains as profit after subtracting costs.
Markup Formula
Markup = (Selling Price - Cost) / Cost × 100
Calculates the percentage increase from cost to selling price. Unlike margin (based on revenue), markup is based on cost.