A weighted average is the average value of a set of numbers, with different levels of relevance. This relevance of each number is referred to as its weight, and is represented as a percentage of the total relevancy. All weights in a weighted average formula calculation should be equal to 100%, or 1. Where w […]

## Present Value Formula

Present Value (PV) formula refers to the exact numerical method to calculate present value of an asset or capital owned in future. The present value is often known as discounted value. Where PV = Present Value, CF is Cash Flow at period 1, r is the rate of interest or return, and n is the […]

## Compounding Interest Formula

Compound Interest Formula, is a numerical method to calculate the interest paid or interest received against a certain amount of capital borrowed or deposit for a defined interval of time at a specific rate of interest. The special thing about compound interest is that it is always applied on the recent amount accumulated as a […]

## Simple Interest Formula

Simple Interest Formula is a mathematical method to calculate the interest paid or interest received at a certain rate against a specific amount of capital borrowed or deposit for a specified interval of time, as a result of a financial transaction. As we know, the amount of money would increase by a certain amount with […]

## Continuous Compounding Formula

What Is Continuous Compound Interest? To understand what Continuous Compound Interest is, first, we need to understand what Compound Interest is. Compound Interest is interest on interest. In other words, it’s the amount of interest earned on the investment where the amount earned is reinvested rather than being paid out. By using a compound interest […]

## Return on Equity Formula

What Is Return on Equity? Return on Equity (ROE) is a financial measure of profitability which illustrates how effectively a company manages Shareholders’ Equity and gets profit from it. By using Return on Equity investors can see if they’re getting a good return on their investments, while a company can evaluate if they’re using company’s […]

## Equity Multiplier Formula

What Is Equity Multiplier? An Equity Multiplier is a measure of a company’s financial leverage computed by comparing Total Company’s Assets with Shareholders’ Equity. In other words, it’s the amount of company’s assets financed or owed by the shareholders. A financial leverage is a direct influence of a company’s capital structure on its efficiency of […]

## Inflation Rate Formula

What Is Inflation Rate? The Inflation Rate is a measurement of the rise of general price level over a period of time. It’s usually calculated for a year, quarter or month. That is to say the Inflation Rate is a decrease of a purchasing power of currency. The higher the Inflation Rate is, the fewer […]

## Perpetuity Formula

What Is Perpetuity? A Perpetuity is an endless consistent series of payments made at equal intervals of time. Said differently, a Perpetuity, or a perpetual annuity, is an infinite stream of cash flow payments. How to Calculate the Present Value of Perpetuity? There are two basic methods used to calculate the Present Value of Perpetuity. […]

## Present Value of Annuity Formula

What is Present Value of Annuity? The present value of annuity formula calculates the value of a series of payments at a given time. It relies on the concept of the time value of money (i.e one dollar today is worth more than one dollar at a future date). Where P is Periodic Payment, r […]