Calculation Of Interest and Annuities JAIIB CAIIB BABA

1. Simple Interest = Principle * Rate * Time

2. Compound Interest (Annually) = P (1+R)

3. Quarterly = P(1+R)^4

4. Monthly = P (1+R/12)^12

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 JAIIB CAIIB BABA

FUTURE VALUE OF ORDINARY ANNUITY

5. FV = C [(1+r)^n -1 /r
C = Cash flow per period

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 JAIIB CAIIB BABA
Q. Rs.10000 is deposited at the end of each year how much
amount will be received after 5 years at 10% p.a. interest?

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 JAIIB CAIIB BABA

PRESENT VALUE OF ORDINARY ANNUITY

6. PV = C [(1+i)^n -1 /r(1+r)^n
C = Cash flow per period

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 JAIIB CAIIB BABA
Q. If an ordinary annuity pays Rs.10000 per year for 5 years
at 10% interest rate, calculate Present value?

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 JAIIB CAIIB BABA

FUTURE VALUE OF ANNUITY DUE

7. FV = C (1+r)^n – 1/r * (1+r)

C = Cash flow per period

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 JAIIB CAIIB BABA
Q. Rs.10000 is deposited at the beginning of each year
how much amount will be received after 5 years at 10% p.a.
interest?

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 JAIIB CAIIB BABA

PRESENT VALUE OF ANNUITY DUE

8. PV = C (1+r)^n - 1 /r (1+r)^n * (1+r)

C = Cash flow per period

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 JAIIB CAIIB BABA
Q. How much amount should be deposited in Bank to
receive RS. 10000 at the beginning of each year for 5 years
at 10% p.a.

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 JAIIB CAIIB BABA

EMI

E = P * r [ (1+r)^n / (1+r)^n – 1]

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 JAIIB CAIIB BABA
Q. A loan of Rs.5 lakh at 12% p.a. is to be repaid in 10
equated monthly installments. Calculate EMI

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 JAIIB CAIIB BABA
Q. A loan of Rs.5 lakh at 10% p.a. is to be repaid in 4 annual
installments. Calculate installment amount?

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 JAIIB CAIIB BABA
SINKING FUND

= F * r / (1+r)^n – 1
F = Funds required for future capital expenditure

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 JAIIB CAIIB BABA
Q. A company plans to purchase a new machinery worth Rs.
100000 in 5 years. Calculate annual saving required to
purchase machinery if ROI is 10%?

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 JAIIB CAIIB BABA
EFFECTIVE RATE OF INTEREST

= (1+r/n) ^n – 1

If the interest is 12% payable monthly, find the effective

rate of interest?

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 JAIIB CAIIB BABA

Calculation of YTM
1. Current Yield = Coupon Interest / Current Market Price

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 JAIIB CAIIB BABA
If a bond has face value of Rs 1000 carrying a coupon rate of 9%, is quoted
in the market at 900 and maturity period is 10 then find out yield of the
bond?

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 JAIIB CAIIB BABA
2. YTM = Annual Interest (PVIFA kd%, years)
+ Maturity value (PVIF, kd%, years)

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 JAIIB CAIIB BABA
Q.4. A bond, whose par value is Rs 20000, bears a coupon rate of 8% and
has a maturity period of 10 years. The required rate of return on the bond is
10%.
What is the value of this bond?

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 JAIIB CAIIB BABA
DURATION OF THE BOND

= Total PVT/ Total PV

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Face value of the bond is 1000, its coupon rate is 15% and time to
maturity is 3 years. If YTM is 10%. Calculate Duration?
a. 2.64
b. 2.81
c. 2.32
d. 2.42

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 JAIIB CAIIB BABA

IE = % change in price for bond in period/ % change in yield to maturity for

bonds

IE = Duration * YTM/ 1+ YTM

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 JAIIB CAIIB BABA
CAPITAL BUDGTING

1. NPV = Sum of Present Value of cash flow – Initial cash outflow

2. PV = M / (1+r)^n

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 JAIIB CAIIB BABA

3. Payback Period = Initial Outflow / Annual Cashflow

4. Accounting rate of return = Avg Profit after Tax/ Avg

value of investment

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 JAIIB CAIIB BABA
Q. XYZ is planning to start a project which requires the total outlay of
Rs.15 lakh to purchase of machinery having a life of 10 years and
salvage value is 100000
Year ending profit before depreciation & Tax is 200000.
Tax rate = 30%
Calculate Annual cash inflow, Payback period ?

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 JAIIB CAIIB BABA
5. IRR = Lr + NPVL / PVL – PVH * Hr – Lr

IRR= Internal rate of return

Lr = Lower rate
NPVL = net present value at lower rate
PVL = PV at lower rate
PVH = PV at high rate

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 JAIIB CAIIB BABA
Q. The NPV of a project is Rs. 1.50 at 10% discount rate & (-) Rs. 0.50 at
14% discount rate . The IRR is

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 JAIIB CAIIB BABA
DEPRECIATION:

SLM = Cost Price – Scrap Value / Estimated Life of assets

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 JAIIB CAIIB BABA
A machinery costs Rs. 2 lakhs and its life is 15 years & scrap
value is 50000. What is the depreciated value of machinery
at the end of 4th year as per straight line method?

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 JAIIB CAIIB BABA
WDV = Previous year’s value of assets * Dep rate

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UNITS OF PRODUCTION METHOD
• Accounting Standards in India (AS-10 and Ind AS-16) recognise 3
methods of calculating depreciation.
• The depreciation amount is not based on passage of time but actual
use of the asset.
• This method is suited to those assets which depreciate in proportion to
their use rather than having a useful life measured in number of years.
Depreciation amount during a period =
(Actual production or usage during the period / Total Expected
Production or Usage during the asset life of the asset )× Total
depreciable amount

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▪ Example;
▪ Company ABC Ltd. Purchases a bottle machine. This machine can
manufacture 1000000 units after which it will have to be scrapped.
The purchase price of the machine is Rs. 20,000 and the scrap value
is estimated at Rs. 20000. During the first year of production, the
machine produced 100,000 pens.

▪ The depreciation amount in the first year will be; =

(1,00,000/1000000) × (200000 – 20000) = 0.1 × 180000 = 18000

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YTS20
 JAIIB CAIIB BABA
FOREIGN EXCHANGE ARITHMETIC

CROSS RATE
A/ B * B/C = A/C

FORWARD POINTS = Spot rate * Interest rate Differential *

Forward Period/ 100 * Number of Days

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 JAIIB CAIIB BABA
Balance Sheet Equation

1. Assets = Liabilities + Capital

2. Income = Revenue – Expenses

3. Sales = cost of sales + Gross profit

4. Sales = Stock in the beginning + Purchases +Direct

Expenses – Stock at the end + Gross profit

5. Gross profit = Sales – cost of sales

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 Current In crore Current In cr
Liabilities Assets JAIIB CAIIB BABA
Trade 10000 Cash 4000
Creditors
Cash Credit 3000 Debtors 8500
Other CL 4000 Inventory 6200
Total CL 17000 Other CA 2000
Total CA 20700
Calculate Working Capital Gap?
a. 6500 cr
b. 6300 cr
c. 6100 cr
d. 6700 cr

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 Current In crore Current In cr
Liabilities Assets JAIIB CAIIB BABA
Trade 10000 Cash 4000
Creditors
Cash Credit 3000 Debtors 8500
Other CL 4000 Inventory 6200
Total CL 17000 Other CA 2000
Total CA 20700
Calculate MPBF as per Tondon committee – Method I?
a. 5025
b. 5125
c. 5225
d. 5445

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 Current In crore Current In cr
Liabilities Assets JAIIB CAIIB BABA
Trade 10000 Cash 4000
Creditors
Cash Credit 3000 Debtors 8500
Other CL 4000 Inventory 6200
Total CL 17000 Other CA 2000
Total CA 20700
Calculate MPBF as per Tondon committee – Method II?
a. 1425
b. 1525
c. 1625
d. 1725

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 JAIIB CAIIB BABA
STANDARD COSTING
Variance = Actual cost – Estimated/ Standard cost
MARGINAL COSTING
Contribution = sales price - the variable cost of a unit.
TC = VC + FC
C-V—P analysis
Profit = Sales Volume – (Fixed Costs + Variable Costs) or,
P = (S × N) – [F + (V× N)]
S = Sales value per unit
N = Number of units sold
F = Fixed Costs
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V = Variable Cost per unit
P/V ratio = (C/S) × 100 JAIIB CAIIB BABA

Margin of Safety = [(Estimated sales – Break-even sales)/ Estimated

sales] × 100
MoS = Profit/ P/V Ratio

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The following cost data is given about ABC Company's product
Biscuits:
1. Selling price per unit - Rs. 200
2. Marginal cost per unit - Rs. 150
3. Fixed cost per annum - Rs. 1,00,000
Calculate the following
Break even sales

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Based on the information given calculate the labour rate variance
The standard time for the job is 500 hours
The standard rate per hour is Rs 70
Actual time took 600 hours
Actual wages paid Rs 45000

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6. A manufacturer produces 5000 units of products annually. The
marginal cost of each product is Rs.30000 and the product is sold for
Rs. 40000. Fixed cost incurred by the company is Rs. 15,00,000
annually.
Calculate the following:
P/V Ratio

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Calculate Margin of Safety
Estimated sales = 100000
SP = 60
VC = 40
Fixed Cost = 25000

Margin of Safety = [(Estimated sales – Break-even sales)/ Estimated

sales] × 100
= 100000 – (25000/ 60-40) / 100000 * 100
= 100000 – 1250/ 100000 *100 = 98.75%
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Calculate Margin of Safety
Profit = 60000
SP = 12
MC = 10
Profit/ P/V Ratio
P/V Ration = 12-10/12 * 100 = 16.67%
60000/ 16.67% = 359928

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 JAIIB CAIIB BABA
Ratios
Profitability Ratios

1. Return on investment:
= Profit Before Tax & Interest / Investment or capital
Employed * 100

2. Earning Per Share

= NP after Tax & Preference Dividend/ No. of Equity Shares

3. Price Earning Ratio

= Market Price of the Equity Share/ EPS

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 JAIIB CAIIB BABA
Ratios
Profitability Ratios

1. Return on investment:
= Profit Before Tax & Interest / Investment or capital
Employed * 100

2. Earning Per Share

= NP after Tax & Preference Dividend/ No. of Equity Shares

3. Price Earning Ratio

= Market Price of the Equity Share/ EPS

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 JAIIB CAIIB BABA
4. Return on Equity
= NP / Owned Funds or tangible Net worth * 100

5. Gross Profit Ratio

= GP / NS *100

6. Net Profit Ratio

= NP/ NS * 100

7. Operating Profit Ratio

= OP/ Sales * 100

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SHORT TERM SOLVENCY RATIO

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LONG TERM SOLVENCY RATIO

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ACTIVITY RATIO? TURNOVER RATIO

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YTS20