Victor Technology V12 - Manual (Page 14)

V I C T O R T E C H N O L O G Y
14
Basic Financial Calculations
Before describing Basic Financial Calculations, it is important to review and
understand five basic terms and keys used with the V12.
TERM /
KEY
DEFINITION
n .
The number of periods in the financial loan, often
expressed in days, months, or years. The interest
rate must be defined per period.
i .
The interest rate per period. Often an annual rate
is converted to monthly by dividing by 12, weekly
by dividing by 52, or daily by dividing by 365.
PV
The initial cash value received or paid or the
present value of a series of future payments when
discounted at an interest rate.
PMT The payment made each period.
FV
The final cash value received or paid or the future
value of a series of payments assuming an interest
rate.
When using the V12, four of these five variables must be known to perform a
calculation. The unknown variable can then be solved.
Positive and Negative Cash Flows
When performing financial calculations special care must be taken to enter
values with the proper sign. A payment or outflow of cash must have a
negative sign. A receipt of cash must have a positive sign. For example, the
initial cash received in a loan is a positive amount. The payments are negative
amounts.
Payment Function
Payments in compounding periods may be made either at the beginning of a
period (such as payments in advance, and annuities due), or at the end of a
period (such as regular annuities or payments in arrears).