In Business Mathematics, there are a variety of formulas used across different topics such as
finance, accounting, statistics, and general business operations. Below is a list of commonly used
formulas:
1. Basic Arithmetic Formulas
• Percentage Calculation:
Percentage=(PartTotal)×100\text{Percentage} = \left( \frac{\text{Part}}{\text{Total}} \right) \times 100
• Simple Interest:
I=P×r×tI = P \times r \times t
Where:
o II = Interest
o PP = Principal
o rr = Rate of interest (per year)
o tt = Time (in years)
• Compound Interest:
A=P(1+rn)ntA = P \left(1 + \frac{r}{n}\right)^{nt}
Where:
o AA = Amount (Principal + Interest)
o PP = Principal
o rr = Annual interest rate (decimal)
o nn = Number of times interest is compounded per year
o tt = Time (in years)
• Simple Discount:
D=P×r×t100D = \frac{P \times r \times t}{100}
Where:
o DD = Discount
o PP = Principal
o rr = Discount rate
o tt = Time period
• Compound Discount:
A=P(1−rn)ntA = P \left(1 - \frac{r}{n}\right)^{nt}
(Similar to compound interest, but applied in discount calculations.)
2. Profit, Loss, and Markup Formulas
• Profit:
Profit=Selling Price−Cost Price\text{Profit} = \text{Selling Price} - \text{Cost Price}
• Loss:
Loss=Cost Price−Selling Price\text{Loss} = \text{Cost Price} - \text{Selling Price}
• Profit Percentage:
Profit Percentage=(ProfitCost Price)×100\text{Profit Percentage} = \left( \frac{\text{Profit}}{\text{Cost
Price}} \right) \times 100
• Loss Percentage:
Loss Percentage=(LossCost Price)×100\text{Loss Percentage} = \left( \frac{\text{Loss}}{\text{Cost
Price}} \right) \times 100
• Markup:
Markup=(Selling Price−Cost PriceCost Price)×100\text{Markup} = \left( \frac{\text{Selling Price} -
\text{Cost Price}}{\text{Cost Price}} \right) \times 100
• Selling Price (with profit or loss):
o For Profit:
SP=CP×(1+r100)SP = CP \times \left(1 + \frac{r}{100}\right)
o For Loss:
SP=CP×(1−r100)SP = CP \times \left(1 - \frac{r}{100}\right)
Where:
▪ SPSP = Selling Price
▪ CPCP = Cost Price
▪ rr = Profit or Loss percentage
3. Time Value of Money
• Present Value (PV) of a Future Amount:
PV=FV(1+r)tPV = \frac{FV}{(1 + r)^t}
Where:
o PVPV = Present Value
o FVFV = Future Value
o rr = Interest rate (per period)
o tt = Time (number of periods)
• Future Value (FV) of an Investment:
FV=PV×(1+r)tFV = PV \times (1 + r)^t
• Annuity Formula (Regular Payments):
PV=PMT×1−(1+r)−trPV = PMT \times \frac{1 - (1 + r)^{-t}}{r}
Where:
o PMTPMT = Periodic payment
o rr = Interest rate per period
o tt = Total number of periods
• Perpetuity:
PV=CrPV = \frac{C}{r}
Where:
o PVPV = Present value of perpetuity
o CC = Annual cash flow
o rr = Interest rate (as decimal)
4. Break-Even Analysis
• Break-Even Point (Units):
BEP=Fixed CostsSelling Price per Unit−Variable Cost per UnitBEP = \frac{\text{Fixed
Costs}}{\text{Selling Price per Unit} - \text{Variable Cost per Unit}}
• Break-Even Sales Revenue:
BEPRevenue=Fixed Costs1−Variable CostsSales PriceBEP_{\text{Revenue}} = \frac{\text{Fixed
Costs}}{1 - \frac{\text{Variable Costs}}{\text{Sales Price}}}
5. Statistics and Probability Formulas
• Mean:
Mean=∑i=1nxin\text{Mean} = \frac{\sum_{i=1}^{n} x_i}{n}
Where:
o xix_i = Each data point
o nn = Number of data points
• Variance:
Variance=∑i=1n(xi−μ)2n\text{Variance} = \frac{\sum_{i=1}^{n} (x_i - \mu)^2}{n}
Where:
o μ\mu = Mean of the data points
• Standard Deviation:
Standard Deviation=Variance\text{Standard Deviation} = \sqrt{\text{Variance}}
• Covariance:
Cov(X,Y)=∑i=1n(xi−μX)(yi−μY)n\text{Cov}(X,Y) = \frac{\sum_{i=1}^{n} (x_i - \mu_X)(y_i - \mu_Y)}{n}
Where:
o xi,yix_i, y_i = Data points for variables X and Y
o μX,μY\mu_X, \mu_Y = Means of X and Y
• Correlation Coefficient:
r=Cov(X,Y)σX×σYr = \frac{\text{Cov}(X,Y)}{\sigma_X \times \sigma_Y}
Where:
o rr = Correlation coefficient
o σX,σY\sigma_X, \sigma_Y = Standard deviations of X and Y
6. Cost Accounting Formulas
• Total Cost (TC):
TC=FC+VCTC = FC + VC
Where:
o FCFC = Fixed Costs
o VCVC = Variable Costs
• Contribution Margin:
Contribution Margin=Sales−Variable Costs\text{Contribution Margin} = \text{Sales} - \text{Variable
Costs}
• Contribution Margin Ratio:
Contribution Margin Ratio=Contribution MarginSales\text{Contribution Margin Ratio} =
\frac{\text{Contribution Margin}}{\text{Sales}}
7. Inventory Management Formulas
• Economic Order Quantity (EOQ):
EOQ=2DSHEOQ = \sqrt{\frac{2DS}{H}}
Where:
o DD = Demand
o SS = Ordering cost per order
o HH = Holding cost per unit per year
• Reorder Point (ROP):
ROP=Lead Time Demand=Daily Demand×Lead TimeROP = \text{Lead Time Demand} = \text{Daily
Demand} \times \text{Lead Time}
8. Depreciation Formulas
• Straight-Line Depreciation:
Depreciation Expense=Cost of Asset−Salvage ValueUseful Life\text{Depreciation Expense} =
\frac{\text{Cost of Asset} - \text{Salvage Value}}{\text{Useful Life}}
• Declining Balance Depreciation:
Depreciation Expense=Book Value×Depreciation Rate\text{Depreciation Expense} = \text{Book
Value} \times \text{Depreciation Rate}
9. Loan Amortization
• Loan Payment Formula (For Fixed Monthly Payments):
PMT=P×r×(1+r)n(1+r)n−1PMT = \frac{P \times r \times (1 + r)^n}{(1 + r)^n - 1}
Where:
o PP = Loan amount
o rr = Monthly interest rate
o nn = Number of payments (months)