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Calculation of the future value of a lump sum may be necessary for many reasons. The investors or lenders may want to know how much they will get for their lump-sum investment after a specific period of time. Knowing the future value is important for the borrower is important too because he or she has to pay the total amount of lump-sum plus any interest on them.Future Value of a Lump-sum AmountWe know that, Future Sum = Principal + Interest Rate on PrincipalSo, for the first year, F1 = P + P x i = P (1+i)F2 = F1 + ... Read More
The procedures and systems used by a firm can be cumulatively termed as financial business processes. These processes may include a simple task as entering a financial entry into the account statement on one hand while, on the other hand, it may also contain complex and hard work to predict the future modes of business.For a company to survive and grow, it must engage in lots of businesses processes at the same time. Therefore, it is implied that the financial managers are equipped with knowledge in subjects they specialize in to rectify complex errors that might creep into the process ... Read More
We can start calculating multi-period compounding right from calculating effective interest rate (EIR).The effective interest rate is given by, EIR = {1+i/m}nxm - 1 ------------------ (1)Where, i is the nominal interest rate, n is the number of years, m is the number of compounding per year.Using equation 1, we get, Fn = A { (1+i/m)nxm - 1} / i/m ...............................(2)Equation 2 helps us to use the present value of an annuity in the case of a multi-period compounding. Here the discount rate will be i/m and the time horizon is (n × m).Let us consider an example of investment of ... Read More
For achieving success in cutthroat markets, efficient organizations streamline their finance functions in an organized manner. Since the financial objectives reflect in various reports that are handed over to stakeholders, a finance manager must be able to put forward financial information for the laymen as well.Companies need to organize their finance functions for a variety of other reasons as well. Some of these reasons include the profitability of the company. increasing shareholders' value and maximizing wealth. Whatever the reason of organizations, it is the duty of the finance manager to keep the process streamlined.Note − Companies organize the finance functions ... Read More
To display regression intercept using model in a plot created by ggplot2, we can follow the below steps −First of all, create the data frame.Use annotate function of ggplot2 to create the scatterplot with regression intercept displayed on the plot.Check the regression intercept.Create the data frameLet's create a data frame as shown below − Live Demox
Although the finance managers found limited access to decision-making in the 1950s, the situation has changed drastically nowadays. Now, a finance manager is the person in the key role to raise and allocate funds according to the company's needs.Raising FundsThe traditional view of financial management has dominated the managers to work within the limits set by the decision-makers in the corporate organization. The finance managers only got attention in the case of promotion, reorganization, expansion, and diversification. The financial managers were called upon to express their knowledge in order to raise the funds.Note − Modern organizations pay more attention and ... Read More
To display regression slope using model in a plot created by ggplot2, we can follow the below steps −First of all, create the data frame.Use annotate function of ggplot2 to create the scatterplot with regression slope displayed on the plot.Check the regression slope.Create the data frameLet's create a data frame as shown below − Live Demox
Although both functions are related to finance, there are some distinctive differences between long and short-term financing decisions. Long-term decisions are made for more than a year while short-term decisions are yearly decisions. It is easier to understand when we compare some of the long and short-term decision examples.Note − There are differences between long-term and short-term financial decisions.Long-term DecisionsLong-term decisions often offer the strategy of the businesses. Some types of long term decisions include the following Capital Budgeting is an investment decision where long-term budgets are prepared by companies. There are mainly two considerations in capital budgeting −Evaluating the probable ... Read More
To create a scatterplot with low intensity of points using ggplot2, we can follow the below steps −First of all, create a data frame.Then, create the scatterplot.Create the scatterplot with scale_color_hue function for dark points.Create the data frameLet's create a data frame as shown below − Live Demox
It is the nature of financial functions that higher-risk investments offer more returns. Similarly, low-risk investments return less. For example, if you invest in shares, the risk is more there. However, the returns will be higher too in equities in comparison to a less risky investment such as government bonds. This relation between risk and return is popularly called the risk-return trade-off in finance.In the case of mutual funds, the funds are named according to the market cap of company equities, such as small-cap, mid-cap, and large cap funds. Here, if the fund deals with only small-cap, the funds' investments ... Read More