manner.

procurement
namely
management
financial
constitution". or of service
organization
applied has and Raymond
considered
size, studydescribed successfully. management'
financially
decisions management.
directed
Its
are
connotes James
to controlling
certain
a
Financial
planning,
y ion the
mafunct
definedaplication
be of
MÉANI
DEFINITGIAONDN
According 1.2
i )
In iv) iii)planning
Financial i) Analysis Raymond financial Financial
nature reviewing
which
short Mobilisation
Management
Control to organization.
as affect have
primary
according
Van plans.
Plans
and In
.
to
Essentials
anyimplications. of lies Chambers to It Imanagement
ThHorne,
e administering the
ofChambers, alone management
ownership making be touches Archer
beneath their
the kind financial theas of
of various the different responsibility term words the
whole
financial is
of to It execution. management
decisionsobserves, on someFinancial
"Planning
to aim at
planning Financial
and of of
definitionundertaking narrow applies and departments activity of and
utilizationsubject financial funds To these implications, all implies
resources
"The applies
say control the plan". effective an ofGuthmanAmbrosia, Management
to
prOcesses". It of is an
is the
centers resources brings term the that any maybe other to the concerned and
or to
and an financial "Financial
of inextricable funds
funds
of organization scope activity it the of discharge implementation
business designing of andcontrol
Financial applies whether
organization, an utilization
to used finance and
around
fore of organization. used Dougall,"Financial
in the to of matters a functions
with
anthe the to
managemnent functions. and in
management private an it designate single the dimension
effective two followingregardless subject.organization, isa function. According funds. of "Business tfinance
he
manufacturing irespective and finance business managementtois
decision flowS
fundthat
profit-making In All the
andmajor facilitating
the It of
efficient
aspects of the
its nay field may may businessfunction financial aising,r finance
aspects words which of
aims may
Ol e orits of be be

OBJECTIVES
The
Objectives
Primary
Maximization:
AProft accomplishment
to two Objectives
profit Primary
The MaximizationMaximization
Wealth Profit objectives
whi c h of fo r andEvery can a
According
activities
every profit. each
major very Objectives
thought, theffect e continue maximization
thing would very level of
In efficiency of OF
which growth of of the to theseobjectives financial
FINANCIAL
emergeseventuallybusiness profit or this objectives.
absence
growthwould objective, of of
minimise resulting of and varied of
coming Financial
enterprise any management Financial
from alike of wealth financial
commercial profit al objectives
profit resultbusiness from continueto
/neutralise Objectives
Secondary MANAGEMENT
business maximization.under Maximization
Making Returnof
Facilitating
RiskDecision Management Management-An
shoulind its or
the
decisionSafeguarding Supporting
Compliance
Regulatory
Assets with Management
Eficient
imization organization. of can
profit organization surplus
he operation. financial
ambi t
tundertake enterprises
its be
proft. but journey no is Utilisation classified
of
Let measured of
also
i.e. This According
Profit commercial primary
management.
us Control
not
achieves primarily
in turn
cut th e as Overview
end down only statedisbusiness
dividapproach objectives
our in
MechanismsResources
of
below:
such to organization is exist the
discussion There light
decision,holds activities al this be tothe to
school seed resultworld. make viz., are of 1.3
that those
 outflows temMaximization
JWealth
the decisions
According 1.6
3. 2. 1. A. for manager
shares.the net where, Algebrically,
NPV = is
(wcalth) it NPV cash Net view single
stackholders. per sons, of
shareholder present the
stakeholders coporateEssentials
versa.
viceand risk relative interpretations Advantages A inflows of
Consideration Recognition value Clarity:
wealth positive Ck=A,,A,, = Present which to
this objections,
element has = NPV Total who
discount of of value Investment toappropriate and It
money shareholders. This would in take
networth A, = present cash Value concept, wi l
cannot have of

selecting factors
by
of by Time
of
like concept of respect all
Wealth supposedly financial
= Net
thPresent
e
I
=l
(1+k)'
(1+%)
(1+k) expressed
A as
outflows.
maximize
(NPV) thiscalled enterprise Financial
to
discountstream
or funct i o n
shareholdersreconcileManagement
the value
financial concept
Risk
appropriately Value: term enhances cash (|+ At
Factor: The of A, rcfers is
to unambiguouslyMaximization shareholders' Value k) of
the
entrusted
high bring 'profit'. term decisions outflow
rate of --C Algebrically,
This shareholders'
tend benefits inflows to net is solely the
discount This 'wealth' (cost the not
discounting
it An management
present to
concept down concept
escalate
to in
of or difference
val ues practicable. i.e., diverse
ofmeet to
wealth. the
rate to focuses is
Concept light
capital) cash C Total value profit the body a
present takes
for takes not wealth. interests
inflows
cashthe the inflows should
highly amenable to The of present between of maximization. objective prime
professional of
consideration cognizance enhancingthon
intovalue. e achievingHence
marketwealth th e
of
risky value firm. take various
valuecreated finance
of various higher such
projects at time of OfThe
its of

4.
1. B. commands Since aspectsProfitUniversal
clarity.
shares, across
world.the
2. wealth maximising
price that in Besides
of dividend
dynamics
3. Maximization Secondary
profit management.
objective. in recognizes paying
Facilitating
al employees,
Therefore
of possible its shareholders. wealth maximization
guidelines
requisitions.
and proposal
Risk and implications
about scarce,
altogether. of dividends This like
functionalmaximizing
from reflects a Validity:
so significance.
maximization profit
while tofirm a neglect
Management:
functional financial cannot return as the regular
its universal
maximization concept
onmental finance Objectives However maximization
significance the
firms
keen paid
Financial
to Decision thcreditors
of to
to of
As
wealth
shareholders of
concept This
managers
be e discharge Return: shareholders' tend dividend does Financial
functional various stakeholders
manager on
validity. or time
management resourcesmindlessly returns can the
It
ought to
a
maximizing
result maximizing any
notvalue is
concept
Financial management Making: etc., of
of escalate concept other
dynamics, proposalsacross tohas Business the
its be.profit to oriented
dividend
though
regularly
narrow-focused
recognize Management-An
design its and expected market of has
available toobligation
like Financial part
a be returns
management to sanctioned stakeholders.
the
Finance takebetter enterprises maximum a on small firms
profit-may addresses
money, been
i.e., for submitted
has shareholders, primary firms. a
various hierarchy financial distribution.
of high price due tothe accepted
currently to the networth; toare wealth risk
economical, submitting communicate for manager safeguard Management of cannot
wealthobjective
relatively
The enhance
pedestal of to all
effect and
factors
kinds has by
al weigh decisions providing need enhanced shares uncertain not these of offlawed
to with them. debentureholders, In
beconsiders be Overview
to
of projects/proposals
expose to this shareholders.
earnings be
political, risk various it Funds, the has their earn maximization
underplayed of compared interested of
the able lacunae, and
in valid
information
and inmaximum
adequate backdrop market wealth
financial network market to lackcertain
operaionar
emerg1ng financial to interest.
the risks; pay per of all
social, funding being make light in it 1.7
send
 It tothe top line below. STATUS 6. 5. 4.
levelar. ising be 1.8
organization by
depends objectives the
management him
Treasurer, The
mechanisms within the in inmanagement.
Compliance
other management departments.
ofand communicate aSupportive
nd financialinstitutionalise
rupee Thfrugal
e ly management
Eicient
attainment
on the
manager.
in
or
position irregularities,
The safeguarding
AND
th us
domainwords, place lightthe
the intemally
impact
its basic
financial
allocatedoperational the
profligacy Ut ilisat i on addi demcodgucratpehdical, Essentials
tio n
In
fiom
of department
'FinancialHe finance ofROLE financial ofhas financial tools to
variousfinanceorganization. of
violationsprevent
department
to it wi th on It
regularly Cont r ol to multiplanale yse of

functions
overall
ofits
oWn proper
tor has
several
manager
OF the
limits ensure
has financial
to and cnsure
Regulatory
to
has
overallparameters
to
Environment:
expose financial
them.departmentmechanisms relevant they
and resources of technological, Financial
sour
d ces the
be Resources: shoul
actors Controller of
FINANCE assets

implications Management
departmentapplication
functions finance fraud,
of aexternally
re regulations, objectives to
objectives Financial
like rule, allowed.backed that to
gnificantly has of that the an d madeshouldnot their be while Jegal
th e errors, allocated ensure
size isbeen manipulations
orMANAGER all implications goals,
value domain.taenvironmental.
ught shoud and
which,
of Chiefheaded organization.
to bythalel norms, by Norns ofcontrol
management Financial
has accountable Financial
the
ofmanagement
and discharge.
financial
It
financial has prior various functional organ1zation that making
goals in Financial
illustrated transactions to of of
deVIces allowed to
be
segmentS
utilize
various
differs turn,
firm, to standards and budgets.
through them the
by
negligence, and
sanctions
put regulatorydecisions financialof of
decisions managenment
decisions risks
ofresources He an ethicality
frugality, for application
naturefrom has is inmalpractices in Safety: to to of
organization.
contribute
would executive
Officer' . entered each
to
accountable the place and and various all various .They
at
offimmto accomplish chart bodies. functional and
engage their
financial executed are
rulesFinancial
iness, mobilized He
suitable into taken levels every ahas oftypes
firm. calledgiven risk own
The is sna by Input to in to
to a

Department
Production philosophy
illustrated.
domain is of of
|Accounting
Financial a
large
So tomachinaries,
deployed
day term the The Funds Kole Managing
Director
these requirement,
requirements on. be torequirements first Finance &
BankingManager organization
capital of
echniques Therefunded day in and Finance management
operations a the denotes foremost
|Liaisoning
Exchange Bank &
ofare by equipments, ManagementStock Marketing
Department
fixvarious
ed the business
part of Manager Directors
Board of wherein
like
current capital long anFinancial
budgeting, and thereof of while
an
responsibilities
term
d
techniques
working liabilities is vehicles,
needed /
Cost the so
enterprise.
and
permanently working capital Estimation AccountingManager
Cost
Department
Personal Management-An
organization on.
The
capital. and like etc., for and of
forecasting tools Evencapital the finance Budgeting|Auditing following
which working
Financecreditors, blocked acquisition
out is
of hierarchy
available Requirements
manager
techniques accounts total required
of are capital. Accounts Overview
is
manager while to of DepartmentFinance
for working for be Accounts
Manager
Finance sample
of
land, The has TaxationManager&
a financial
estimatingremainder permanently
such has payable meetingbuildings, term to of
as to estimate chart 19
-cash apply the and capital the long Taxation
is
 minimise has minimumstructure ot termshortrequirement
toolsproper funds making
1.11 of the the expectation the equity significantly
merits financing
debtfirm's to the optimum debt requirements
majoritiy of shareholders,
aspiration
of
the retention
stabilization supposed He various longfrom loaned
down
detemine both issue decide of of
in of stncture. and decision
increase mix capital
Overview and own dosage event equity atarrive and at period. prudentout financed
of
totaland department.
tumbling maximizes thestability, to Detbttheir the funds of and
a shareholder's to excessive firm is hand
thedeploymenttermfundedof funds
to and Therefore
opportunities, has
manager capacitythe pure the
to one
determine
control
obtain
lean be out
planning
has decisions.
have examine a
maintain
Management-An dividend in thewithhas shortbe to thatowned
in managergrowth
policy of
liquidation during have
tinance
reflect BothhasBut use on
manager
as line value the to should note
making
fiancial
capital.
finance leads
to retain the
future The free to needs
may finance
growth
dividendconsidering
balancing taxation,
practice, investnment shareholders.
funds
financing. in has arise to dueto and
capitalisation has needs to betweenDecisionofobjectives
obligations. fim
riskdisbursement
finance manager has important build
It fundingof decision, of or to thereon term capital
cost
dissatistied. optimum like. debt point is enhance maintainlikelymanagerhe capital
its
Financial dividend
Hence it context
long balance to
for various of Thereforeother. working and overall
for
minimises
by the of
use the though finance shocks impact also determined.
beshould has
eamingsstock. taken and investment
sourcesof to debt dividend will the to overall finance theFixed Planning
manager
needThe share,
industry
bonus Theearnings order thisbetween is proper
be of Decision
Financing
3. financing firm service whichon addition, absorb the
even eamings. of
other.
theallocation be need In funds. whileItsources.
may
entire and and drawbacks.
major the expensive capital in that Further funding. Financial light
of
shouldgrowth Havingmade the to its mix
assess a Finance
shareholders
price handthe
fim driveinability
equity
ensure
and balance sourcesfund
further the
the of enhance enhance capital
annual of In term
on two in
retainsmarket oneneedsof decision
optimal future source may cost and cost andof of
value and are is
to
on

delphi
requirementsdecision decisions practica
rate index,
expenditure
element. decision
tree manager
inyest to Anyentail
decisions
several normally theirlight mainly
manager notworking
decisions
inventories ofmayifit
uilisation distribution
fim
earnings,
ofhasof
Iavstment
in
the size cant
sphere
tothe challenging out Contraril
average terms. of the does run
certainly
method represents
to the implications
in are
decisionThese riskin finance
amongthereof
much expenditure finance of efficient
alternative These decision
entire
receivables,
the decide cap1talapplied
retum, precise decisions managenment dividend
method,
regression and
budgeting. how highly willHence
benefits
the future.
estimate portfolio various
context decisions. and distributtse
of value so resources inproposals
decision profittoolsrate theappropriate this : of
the
If capitalis contingencies effective in
enterprise.
examine term cash, However quantum butopportunitie
Management
1.10 corectly important
manager revenue, present
budgeting this
accounting
not?. andit proper temporarily
making capitalof In finanical Therefore
nature of capital
among to he
or These Short
This scrutiny net on.invest evaluation
objectively
at Yetcontributes
theIf
business.
sales
ANentage
tirting
and mostFinance called cost,captal value.
on decision: so tem the arive
ofvanousdecisions:
funds
working
considerations.
Securities. decide growth
forth compositiondeep period, and to scarce
opportunities.
run.and to eamings. shareholders
the
is decision of whether longlongbenefits
returm
present in lossand and of to
alocation indubitably hasthe its
management. or termsvarious allocate
Deci
restnent
. sion
decision appraisal
back
of
of
essentially
the
economicproposal with and
committed
deeply term
marketableof
to fixed 2.Dividend
Decision in funding
assets.
manager
retention
termexpenditure
in pay net rate decide its concened contribute delight
their proposals
are return, how to investment
in measure involve capital
namely,internal
to to project Short
accure lapsehugehas Financemayfor
and Long entail There
tinancial has and are a its funds
otunds assets of b) and
it
a)
 Money period.
considered.
happens. thaninflows
sooner to waiting
receiving
Rs.10.000 withTherefore. thc preferredIfa carn tor of Whenperiod
one finding
ready value. means
waiting
exist and interest
valuable provided future.
earlier of
time cashThe his
outflow of be there is timeamount by process
for interest. thantime
of be longer words,
should more
value. prefer
option may
rewarded
is
money
conmand
TECHNIQUES compound
in accrued
rather
Value cash same He/she he/she
a is other an would of
uncertain,
Immediate
the the same The
money overtoday command rate est nowfor theinterest value.
heavy given money. the
In suitably
If prevailing Money
in rewarded
receiveapplying
accruing preference.
he/she 'interest'.rate. is VALUEmoney compound
time. can as
Time of acquired
value
/received is
X future
interestPREFERENCEthe Consumnption:
he
well
is
of not If year, he/she Opportunities:
needs. to
be point is. the receiving today, COMPOUNDreceive
properlyas By
prefer or
timeis will out do it time as the principal
interest.
decisionone
better termedon in current value
asset future provided basedexpressed Since money to
decisions flowed
asset called
after not are may
capital for urgent prefer on compound future
at the is TIME Uncertainty:
of theythey
suchmoney capital amount Investment
Preference gets / computed
received or is amount
received, reward probability
capital This is FOR VALUE
people
Wheninterest, the
CHAPTER of from from today preference, meet person interest. suitable
find
picce of addition
immediately. REASONS as
2 makingbenefit
a
inflow money
value streaming this
Rs.10,000
This to
iii)
FUTÚRE future.is
Generally, easily
called
interest
receive
period. ii)
When cash some time i)
the can
On But The the IS
 2.3
by 4 12 thelu compound manyof otheraxd
year) divided by by on conpounding. series seyarately
Money year) divideddivided contimuously tur lu 12
a 10 thatvalue, and
in year) and continuously
of a
semi-annual be the
in can be be of tuturo 1l
caleulated
Value year ain months 2. can. 8
12. to find valuc) 9 value Exoreises
by by canby
interest daily Exercises
a quarter multiplied ó interestto individual
Time in interest interest
multiplied
multiplied Exercises as uscd arrived tuture
rocoipts
compounding two twelve senmiannually, Paymenta be
called
four paying be lo
theits is and
is quarterly,
monthly, mathenaticallyand or
there
is is be can
can can be be and is 2,10 of payments up value 2.12
amount,
therethere can are It lomula
Continuous
Compounding sum
years (Since periods investors. Serles rosult.and
of interest P= (Since
(Since computed computed2.8
periods institutions And maturity
Frequcncy Present
value computed
table, periods by
uneven
of 2 to following ycars 2,9 of computed 2.11
Number is 2.6 a a the
of 4 12 the ot of oe the value is o' -lrate
-Future
FV nteres of scrics payments llustratlon
Rate m is is use number
is is
nunnber llustrations
number tinancial (It
Principal llustratlons
Value being give
semi-annual,
mm is by Number
e-2.7I83
m= r= quarterly,we interestinterestinterest udethe a be will
n monthly, is is can
When and and and Future
thecre
it cachup
Some
of
the case,
investment Where - and paymentsN
sum
If 2 If If
Where
For For For Simply: Refer a Refer Whenyeats thenRefer
words,
I. 2. 3. suchvalue.
3.

Future intereg paymentsA

a[FVIF\Table: the
ntetes made paidi
Facer valueinterethancompule calculated
isfor can
be per be
compoundi Index rate. as can
receiptdifferent Re.l compound
future higher periods
Fomula periods
interest to
annual
Value Fomula
of the be
| Factor 5 of ot
of payment at factor thewill to liscusscd
nunber
interesl
Future diflerent
periods scries
cqual made, ExercisesI unber
help applying the
Management
the
Index
single different of of
value
at
payment is
value
followingFVP(|!
)"
Nunber
of
yeats
When and
abov d
with Value use periods future Rate
of
interest vate
future by Perlodsannully. Interest
value the for the make Sum or found The
F'uture
value
Irincipal
und tlheintetest
monhly,
reccived The
Financial compounding.
present value for Re.1 for
1.Appcndix
can givesdiflerent
Lump be rcceiptspuyments.
2.5Compounding yeur.
to caculated the
wuys.
of valueoncIt can paynments. 2.1 aollowing
oraljusting,
in
the future
Usc offactor present,
Table.for a sunperiod lustratlons quarterly perind
Essentials
of for
make
value
future of
Valvelump
yearI.Appendix
|FVIEA] specilicd or
OR is
interestallerol the
valueascalledthe can in at a reccipls
the
fulure
valuc. Wherc
FV Multliple or liequewy
given the made cvery
Fulureis such in
future ind onc future find there such yeurty ou
prescnt, is Annuity in
reccived a on present Refer Wsuully,aN fuumt
2.2 the irale s To It
givesrate. To reccipts given When alertale
2. lal'
\INCdthie
1. it
 2.3 manyof otherand
by 4 12 the In conpound
ycar) divided by by on compounding, series separately
Money year) divideddivided continuously for In 12
a 10 value.
continuously and
that
in year)
of a
serni-annual be the and
in can be of future
calculated11
Value year a months 2. be 12. 8 find value) 9Exercises value Exercises
in by can 4.by canby to
interest daily
to individual
6 interest
Tine ina quarter nultiplied
interest
multiplicd Exercises as used
nultiplied
interest arrived Payments future
receipts
cornpounding two twelve semiannually, called be
four payingbe theits to
and
is quarterly,monthly, mathematically and is
thercis is be be is can or amount, value 2.12
thcretherc can be and arc It 2.10 payments up
years (Sincc can can Compounding
Continuous formula
3. institutions
investors. of sum
of rRate
intercst
of (Since periods
periods
cornputed
computed 2.8 and Series result.and
maturity
Frcqucncy P
Prescnt
valuc (Since tabl,computcd periods by
uneven
of 2 to ofyears
Number computed 2.11
Number is 2.6 following a 2.9 a of the
m is 4 I2 the number of of number
of llustrations the value is
Future
FV Jnterest of series
rate Ilustrations paymentsIlustrati
being give
is
semi-annual, usc is is number
is financial
by (It
Principal Valve
m- m m interestinterest -2.7183 be will
quarterly,wc interest
monthly, madethe eh
P
FV a
is is can
n When and and and Future eachup
thc casc, thereit payments
If 2 If If jnvestnent Where and sum
Where of Refer When Words, Refer
For For For Simply:
1. 2. 3. Refer Some a valuc. P years then
uch
4.

FVIFTae paymentpad t comg

valeintenethan is spe
fr periods
of ecan
calculated periods
in
cornpound for i t make
Index
F rate. can of
ofatifferent Re.l cornpound
future higher Formula
interest 1o
annual
can
Value Formula
Factor of the be
of payment factor 5 discussed
1periods offor
cqualFuturefor
ofuse periods
different thewill
rnade, to interestnumber
number
with
the
help Index following
the
applying 1
Management single differentseries
valuc
gives
at
valuc
payment is
FV=
P(tr) Number
ofycars
Exercises
Whenabove andand
Value future future Rate
of
interest rate
by Periodsannually. Interest
value the Future the Sum or found Future
value and the interest
receivedThepayments. Principal monthly,
Financial compounding
present for Re.
valueof I.Appendix value
future
the one
preSent,
different Lump The
be receipts/payments.
FV=P(FVIFJ
2.5 Compounding year.
to calculatedthe
ways.
can 2.1 or adjusting
a
infollowing
use factor Table.
(FVIFA]
Annuity a sunperiod period
of the
Essentials futuremake of lurnp OR lllustrations quarterty
for I. Valve specificdpresent
yearAppendix receipts
or is
valueas the can valuegivenin atmade
Teceipts a future
value. interest
Multiple afterof the

futurecalledfind onefuture find every is Where

FV or such frequency
in
there such
WFuture P yearly
Usually, out =P|
s To present, is To in
received a on Refer as found
2,2 the irate It
givesrate. given Whenafter
rate the 2. halfused
the
it
 2.3 manyof otherand
by 4 12 theIn compound
year) divided by on compounding. separately
series
Money dividedby continuously for In 12
a year) divided 10 value.
continuously
in year) that and
a be the and
of semi-annual
in can2. be calculated11
of future
Value year ain months be 8to find value) 9Exercises value Exercises
by can 4. can 12.
interest by
daily
individual
a
Time in quarter by
multiplied
interest 6Exercisesinterestto
multiplied
multiplied arrived receipts
future
interest as used Payments be
compounding two twelve semiannually, called
four paying be to and
is quarterly,monthly, mathematically and or
the its is
thereis is be be and is can 2.10 payments up value 2.12
amount,
therethere can be are It formula
years (Since can can 2.8 Compounding
Continuous
investors.
institutions
of
Series
sum
result.and
maturity
of interest (Since periods
computed computedcomputed
periods periods and by
Frequency
value
P=
Present (Since table,
the
use unevencomputed
of
Number is2
to following a
ofyears
Number 2.9
a of the 2.11
of 2.6 of seriesbeing payments
of
m is4
l12
number of of Ilustrations the value is
(It = Ilustrations
Interest
rate give Ilustratio
Rate is is is numberis number financial
by Principal Value
semi-annual,
mm -2.7183
m= r= n= quarterly,we interestinterest interest
monthly, madethe P e Future
FV.=
a
is is can
be will
When and and and case,
Future eachup
thereit payments
theinvestmcnt Where
= = = and sum
If 2 If If Words, Refer
Where FV Refer When
For For For Simply:
of years then
1. 3. Refer Some a valuc. such P n
2 4.

thans forcalculated
becan perandbe number
of;
vahbthe çan as can
thadTab inte paynat pan
compound
interes comoy
im
compound (FVIF
receiptdifferent Index
Rel
rate.1
future higher to
á
periods
Formulaof periods
annual ofR interest
Value Formula
I Factor at the bc is
the
single
payment factor
different
for
5 discussed
number
of periods cqual Future made, will to interest
help Index applying the 1
It
Table.
valuc value Exercises
with
thethe differentof of payment is
Management at followingFV=P(I+
n)" When above and
Value series
onc
use periods future Number
ofycars rate
make
future by Future
value
Rate
of
interest
Periods
annually.
Interest
value Futurefor thc or
Sum found Principal
and the interest
receivedTheThe monthly,
|
Fnancial compounding.
present for
valucofonc
Re.J for made can
gives
Annuity
different
cvery Lump be receipts/payments. 2.5 Compounding year.ways.
to
FV=P[FVIF calculated the
present, I.Appendix
valuc can
payments.
2.l adjustinga
infollowing
use ofgives a sum
period
or
the futuremakefactor future
Essentials reccipts
prescnt,
of lump OR Illustrations quarterlyperiod
of lor value
future ycarI.Appendix
rcccivcd Valve or is
interestafter of the
mn
)
in
valueas the can giventhe at (FVIFA] a spccificd the
future
valuc.
receipts Where
FV Multiple frequcncy
or such
called
future find find
is such
l/Future
there P yearly in
out
Refer Usually,
2.2 irale is in a on present as found
s To It To given Whenafterrale 2. halfuscdthe
rate. it
 2.5 can 'Sinking obligationFundby ifollowing
its yearamount
obligation has reversal
the s
redeem one One find made
'Sinking
Money every 22
required
method, given.
justto and be
20 its to amount under Formula its can TheDue'.
of meetfunds is meet
Value to
17
contrary,
theofAnnuity be It(annuity). 21
Exercisesto modification.
called
calculation
(1t)]|Exercisestoinstitutions will Fund
of fixedhave vahue)
the institutions
is (1+)
Time it 'Sinking
need to the
a order
isfollowing year,annuity -1r)'(1+(1+r) JFV/(FVIFA,
23
Exercis
x investsValueOn (futureyear and some
[FVIFA, in the
and annuity.every by
by are in Future 2.22 withunder
made ofbeginning
method,
2.20 it interest amountThe
madecompanies and
debentures,given invested Annuity. A=n, and
FVIFA
FV/ investment Formula
annuity FV
=
FV=Ato investment Under OR =
2.17 of required 2.21 of 2.23
rate the be
date.of
When specified
Due
Fund
8,Sinkingthe kindabove
IIlustrations the Due
Fund
Sinking Due
Fund
SinkingIlust
Illustrations
Fund.
|7.Sinkingor redemption value to an an at this find OR
an future. shares the amountof
is made the
future.
easily
at
isfund method,Value
future fund Underof toformula
Annuity is
at
preference
(annuity) the Future Sinking itIf Due'use. Refe
at the find annuity. Refer make
Refer Sinking easily the findFund' the
on to of

(109)are follows:
of
on'at
the
end
it ate, has
years, y gva
(n-1) for la year
Thenot
interest fet val Val tal.
The period
oftimeassumption
computeds
inlei yearinvestments
y 10Yfetch multiplied
the maturity Future 14 eacn 7
interest
ofuse on.end
5h
will value. and for 10r
In bring the beginning
p.a. will interest as
nnumbermadefirst
for year
so
interest.
payment and annuity,on
the
the
can
refer combinations
on be 13 1
Rs.1.000 Whencomputed
for formula
will
first maturitybased
can Exercises Rs.1.000interest
payments (5-2) fetch (1+
xr) yAtrui
lof paynent lt the year.
make year ofyear
illustration
years
for the the values
has year. at depositsdeposit fetch be
Managementevenly (1-2) the one
findvarious the
amount denosit 10hcan (+r'
-1
receisituation,
Annuity
vable/payable
by annuity
the has end
made
atRs.1,000
3 years annuity,
to of
and
2.14
Due
same
Annuity
investoryear
will thevalue
year payment of
Value
payment payment valuefor end beginning
maturity r
inanial. When years, the
at of
are
investments
follows. r
to
is
related
table
table
invests the
[FVIFA,J
and of an firstsecond
whenthe last the =A
payment
Future

annuity) This 2.13 an

an asuch of second-year
value.number made second [FVIFA] at
Re.l (r). made A Illustrations of
the the
Due',interest, The due, Value
with
EssentialVals ue amount
of of In
annuity.
future
Rs.1,000 Whenas
the year computed
=A
Value
Future
paymentfor rate is =
Value
Value refers
Under'
of
(10-0), at
on.deposited
Annuity annuity Future
along

SFure nfor
year
the
(5-1),
interest.
Factorthe
value
givesinterest
investment
Future
S.Future
due rate yearsand
so
on
Simply,

an calleditsfind interest, (5
WhenAnnuity follows. Annuity % 10 (10-1) is
and Refer l2 made (l+r)
24 When be at Tor asit
(n) that
be can each any can
4
 2.7 financial
determining Rs.10,000
period,
through
settlement the
present
through
value
=
|1.85
years=
yearsyears
8.01 future
years than
Money 4years=
years=6years=
=
12 3years Interest) 7.25 27 of
6.1 and DISCOUNTING decide lesser
Interest TECHNIQUES
VALUE series time example,
of = = 26 of be
Value of (69/6) /12)
(69/10) process to one payments. future will
a used
of 72/612 72/18 24 (69/Rate (69/9) (69 Exercises or pension,
Time 72/ 72/ in For intovalue
Rate + + 0.35 + + is
receipt)
the technique sumvalue.
0.35 0.35 0.35 future discounted
is is is is
72/ isperiodperiod periodperiod
is is
and
discounting
(or
of
value
of
lump converted formula.
+ isperiodperiod
is periodperiod 2.27 Sum present
doubling
doubling doubling 0.35 of
payment
series a
pay
L(1+
r)" Present
value=
Future
valueInterest
= doubling typecommuted Lump the the FV =
rate
doubling doubling and
doubling a or its is
Period = doubling
This or a receive
is
technique,
Period 2.26 or future payment findyears following
12, 18, 24, technique of Present
Value
=
6, receipts).
the canfive
is is is is 10, 12, Illustrations Value
Doubling interest
interest interest
interest 6, is9, PRESENT
VALUE
/ a fixing to
is is is future is he aftervalueThe FV
Doubling
interest
interest interest
interest of person
Present technique P
Where
valuevalue
(or like value.
discounting
of of of of 69 of
Rule paymentssingle receivable
72
ofRule rate rate rate rate of of of of Present decision a future
rate Refer present When
If If If If rate rate rate a 1. this
of
If If If If

rate not
interest
the ratei
matunty half-yearly,
quarterly
interesl IE the 100.00
5.00105.00 5.5115.76S.79 121.55is the value
5.25110.25 The theirdoubling
does 20%,
be interest
On
effective
rate
ofi would Basis ERI.
maturity 25 doubling
ERI is months months months months percent. the
rate called and
year, of Quarterly when interest. find
question concept. Interest
Such what 24 for
3 3 3 3 basis,
a 1st 2nd 3rd 4th 12020 is Exercisesperiod
to 69
in interest. basis, Thisof
Management time
When The this
one The T}
called on
of (ERI).
annually.
computed
explains
Rs.100.
quarterly
on
is
Interest
for
20%
for
20%
for
20% 20%
for is quarterly
is interest
value
rate
percent.
-1
effective the
methods
of
Rule

(@
Principal @ @ (@ mn and Thumb know
is
thumb'
one
than is
Interest Interest Interest Interest maturity
of on
InterestmorenormalInterest
of compounded
Pinancal compounded iinterest s
illustrationyearon ratecomputed
The
21.55
the
find =
2.25
to of
of interested
and Rule "rule
another

the year the is Interest and

the ofin
Invest 100 20 120 basis. rateto
that is
2.24 Period| two72
thanRate following 1 interestFormula
ofEssencialRate
s higherEftfective
of when beginning
for interest? Basis
year notedannual interest of Ilustrations are are of
isinterest computed Annual I Rate investors
Doubling ThereRule
Effectiisvinterest
e onlyThe of
for
20% Maturity
value
be on whenThethe Effective
maycomputed121.55. is is
One
bewill whenarising the rate on contrary,following
investment.
Example
monthly. is Interest @
effectiveAnswer Principal Ih Refer Usually,period.
26 as
zlue arise interest Interest 10.
9. is
is
 2.11
rate years. 8 of
Asian
is rate
r interest share.
Money at 15 follows. of the
period earningsper
for Compute
percent of earnings
of n rateRs.1,080. as
Value for found The
The Rs.24.43.
factor 8 year. the
Time at now.have be
Rs.2,00,000 can =
Rs.1,000 of
value 0.08] from 1 growth
to the to
now answer
compound
FVIFIS,
3.1722 year in
period
=1,00,000
1.21
× invest share of
-P[FVIF,] -P
[FVIF20ind of =
P[FVIFn,
r] =
one
Rs.6,34,440 amount values,
1080
1.08
/ rate
10-year
Rs.1,21,000
= 2,00,000(
x "
P(l+r)
investncnt 2,00,000 Rs.1,080
to P(1.08) per annual
the has unknown these Rs.15
valuc. a
Table
Value
Method is he overcompound
= = of much substitute earns
an maturity n=l
year
need r=8% increased
FVIF
Where
I),
2.2 made
llustration Ilustration
2.3 is = Illustration
2,.4
=

How P 1080 Asian

&Co.
FV is Where When FV or
FV Arivu Solution
interest.
of Arun the Solution percent.
P
Co. growth
Find Mr.
Mr. &

growing
gillustration the
preference
indeh
applied
value, is
company:
nis of What
perpetual following
value TECHNIQUES
period percent.
indefinitely.
For
present
preference
shares,
thetime
find
the The 10
Here rate, VALUE
PerpetoccuIred
uity perpetually.
to
40 Annuity
Exercise compound
value.
41 ILLUSTRATIONS
Exercise
at
years
amount present
idieemabl
scompany
that be
ues e Perpetual and
Growing
at its and
VALUE/COMPOUNDING
2
for
deposits?
LumpsumRs.1,00,000
=1,00,000
x(1.101
=1,00,000
×1.21
-Rs.1,21,000
Flla a =
Annuity growing
Essentials
of ofValve
anuiydividend
can
tomula=A/t
Interest
=
2.40
of
find
2.41
concept.
=P[1+r"
to
Value
Presentan tol owing = Illustrationare useful Illustration a
his Formula
of
deposits
Method:
isPerpetuity
of
Where flows this
be
Present will Value 2.1 value
llustrotion
2.10 explain
Solution FV
pay P
P A cash FUTURE Gurucompound
6 annuity Future
to The Refer When will Refer
7. Mr.
 2.13
is is both
year.compounded by
Interest years multiplied
n=2x2=4 I using Rs.1,24,000 =
Rs.I,24,000
Money deposit? of for
years. number percentmonthly
of is is
Value 5 his interest - n
0.12,
=0.05, forof and 24
value at and d)
Time percent if =
interest bank investment, r
/2 x4=20 Hence
r=0.10 maturity 0nd020, quarterly
12 a
quarterly, in
at 1.8061 Rs.1,00,000 =1,00,000
(1.24)'
x 2.
half-yearly,
SBIthe n=5 1,00,000
=
[FVIF c) 02J 1.24 by
-P
[FVIF,J his 1)n= divided
rn, in is -[FVIF,J
P =
Rs.1,80,610 semi-annually, (FVIF,
x
oos! Rs.I,00,000 0.03,
compounded 1,00,000
=
× of 1,00,000
1.2155 What value (1+r)
=
P
(FVIF,
= deposits value. (OR)Px is
Value as J
Table
Method Rs.1,21,550
= quarterly. =0.12/4 maturity 0.24 (r
given 1,00,000x = = Semi-annually
=P[FVIF
FV 1,00,000 deposits table =
Future
value is to
modified.
be Amanullah
lustration
2.8 b) (r FV FV 2.
Hence
n=2)
is Iustration
2.7 compounded interest and Annually
it r FV the annually,
Hence Solution
Since = = Ajay Solution is formula
Since What
Mr. Mr. a) a) b)

t percen doubleis
interes interests
ffo Kowth
is
it 8 percent
table, grows to Ifdeposit.
annual required percent.
FVIF 8 his
compound it at Periods
if 10of
Management in
1.628row money
period
2.00
at value
to Hence
0.08] value Compounding
years =\,00,000
[l+0.05]
Hence
interest
percent maturity =1,00,000
x1.2155
r]P[FVIFn,= search
years the 2 x2)
n,r n, row. for -Rs.1,21,550
Fnanaal FV/P24.43/15
at column.
10
l.628 itwill
double [FVIF nearest
P(FVIF
years Rs.1,00,000
the 2
1 Multliple find
to 2 the 9
= = = on half-yearly,
ofEssentials How
long
take = table,
is deposits Formula
r]n,[FVIF[FVIF10,
r =

It
Method
FVIF
n,
.08
FVIF1.999.
of Future
Value
Ilustration
2.5 Valuellustration
2.6 compounded
we Amalraj
Solution
FV annually? FV Rs.2 Fromis Solution
2,12 When5
against
Solution column9years.Future
5%.
is Mr.
 2.27 Find
3188.77
1785.71 9245.16|
4270.68
Value
Present
Money years.
15
of after outflows. 6,000
Value p.a. /Receipts 3
Rs.3,00,000
percent [PVIF,sQog! =
4,000
2,000
Time
0.2745 12
cash
Formula
/ (1.12)³
(1.12)! 6,000/
/2,000(1.12
4,000 Value
PVIF,J
1 0.7513 r] following
Payments Present
PVIF, 9 n,
is PVIF3,00,000
x =3,00,000
x Rs.82,350
x Rs.7,513 receive
rate
Total
x x 10,000 interest x
FV FV FV of the r)"
l(1+
Method to of Outflow
Cash
- = = = expecting - - = Series value flow
cash
Expected FV
current
12%
is
Interest 2,0004,0006,000
a present Method
Formula
value of
Present
Value is ifvalue Value
Present Value2.30
Illustration
2.29
Illustration
Ali
Table the Year
Hasath Solution
present Present ealculate Solution PV Year
PVIF 1 2 3
M. the

1213=24%
interest= interests yer vear prescatand
=129=% vear fomula
8.975 -7.25
=6.1 the
of TECHNIQUESFindusing
rate interest) 8.625 +5.27
6.9
years.
period interest f69,
if 8+ + percent
interest eof of =0.35 0.35 0.35
Management ofi iof Rate three
Doubing rule
rate rate
= = VALUE 10
of / (69/8) (69/10) (69/12) is
after =
Rs.7,513.14
the -(69 rate L(1+0.10)
10,000
Rate years,years, using VALUE/DISCOUNTING
Rs.10,000 (l+r°
fPnanci
Eseas
226al 72 =72 periodis3
9
0.35
8%
=0.35++ +
10% =0.3512% =0.35 Sum
interest FV

= interess iperiod
s period - is Lump
is is if
12% interest
period periodinterest
interest period receipt,
receive
peiod
Docbling doubling
doubling doubling Doubling
period a
c) of Formula
Method
of ustrotion znd
2.27 of Doubling of Doubling Value
of Doubling to future
llustration
2.28 Present
Value
rate the 10, rate rate rate expects
SelstioaHeace If If Cakulate Solution If If If PRESENT
Present
thetable
of
value.Solution
2) b) b) a) b) c) Ayothi
value
82
 Mlustration
ofAbishek
years.
2.32 PVIFA lustration2.31Present
FormulaSolution expects
What Anby Year 2.28
8 3 2 1
percent Present
Value Present
Value the is
Ascertain is Table Method Valve Essentials
p.aexpecting
. present to OutfCash
ilow
Value of
the
present to
receive
valtuheis of an 6,000 4,000 2,000 PVIF
|Management F
of
receive
Method
= Rs.5,000 at
Annuity Financial
value Rs.17,325.50 =A[PVIFA,J
3.4651
-5,000
= x Rs.17,325.52 = = Table
5,000 - 5,000 x A Total
Rs.10,000
of
the x |r(l+r"
[(+r annuity Present PVIF12% AtValue
(PVIFA,J the 0.71180.79720.8929
annuity 0.06
(1+0.06) - ifend
the
at
(1
interest f
of
Value = Method
assuming end + each
0.06)*
rate
of year
each is Present
Vahe
an 6 for
interest year percent four MASA 3188 1785
yea
y
Solution Formula
MethodSolution
Rate IMustration
is tKayeri
Rs.1,00,000 hMlostration
e 2.34 present four to endAsraf 2.33 PVIEA
Solution 10 the Asraf Present
Value Present
Value
1. percent. first Present
Value year. end Ali of ofAli
Hospital value interest five Table
use ofFor two Bygoing of is is
fifteenth yearsgoing
the What foryears can
subtracting is Value
PVIF
table first the expects be to from
9 to
two would next
respectively easily year. receive percent receive Method
now.
five cash
found. the pension = = r] Rs.67,100 = = =
valueyears, be Rs.57,852 = = =A He -=A[PVIFAn,
p.a. The aRs.67,101 10,00010,000 10,000 A
theyears. inflows 12,000 PVIFA wil pension
present
at and
[PVIFAS, How
pension r(1+r) (1r)+" 1
present not x x
10% The x Rs.12,000
of much x
Rs.3,00,000
then [8.061 receive of 6.7101
(PVIFA. 6.7100
4
with value value rate years wil Rs. Time
expects is
its can
of -3.240][PVIFA - pension the 12,000
continue
respective be
of
interest from from pension 0d Value
cash and a
receipts
annuityfor PVIFA for the
found
infiows?Rs.2,00,000
from
=
end for year of
12,000 the wortheleven Money
years. out
exactly
investment ofend of
by
4.821
x 15-year, offifth now?
years.
make from at 2.29
first year the
 Solution yearIllustration
from 2.39 PVIFA instalments. Illustration
Solution
Formula
Method his 2.38 PVIFA 2.32
Ezhilan Aravazhi
Recovery
Capital
instalments. Recovery
Capital employer. Recovery
Capital
his
borrowed
employer. Recovery
CapitalTable Table
Essentials
borrowed
How
How Value He Value
much
He a is of
much 15-year
is Method:
required5-year a Financial
Method
required he
Rs.15,425.40 = x60,000 x=
=60,000
0.25709 has Rs.75,137.12
he /3.9927=
(PVIFA,]
-3,00,000/
-3,00,000 =
hashousing pr(l+ry tovehicle
to PV
51,481.64 =(PVIFA /
=5,00,000 L(1+ry payrepay Management
=5,00,000
/9.7122 = to to
Rs.15,425.35 =
(PVIFA,
60,000/
=60,000
/3.889 = = [PVIFA, /
PV payrepay loan of PV/ every.60,000loanof
/[ every (1.09)ý]
PVIFA,J as [PVIFA, (1.09) 10.09 year? five
as
fifteen
equal
Rs.5,00,000
year. Rs. J
equal
J ends at
9
Cnds 6po at perta
oí
a te

Solution
Rent series an 2.Present
MOstrotion
Azarudeen
annual 41 Solution lustration
Arunachalam
indefinite
rate10
is 2.Present
40
annual
Year per Perpetual
Value
3 2 of
increment
2
Year year rent
rate has
Value percent.
period. Value
5 4 3
increased if is
Inflow
Cash oflet ofa
10,000
12,10011,000
13,310
14,641
the
of
Rs.10,000. out
of expecting
Calculate
interest
10 a
Calculation
percent her Growing Perpetuity
12,100
13,310
1.10 x1.10 10,000
x1.10
11,000 1.10Increment
>x x as
10,000x1follows: rate building Rs.50,000 5,000
/0.10
= - = the a
The A/r perpetual
isp.a. Annuity present
Present
Value
Total of 8tenant for
PVIF8%
at percent. Find
Present
0.7350
0.6806 0.9259
0.8573
0.7938 commercial value sum
the has
present
agreed of
of Time
Value
Rs.5,000,
the
Annual
Inflow Value
10,000
valuepurpose to perpetuity,
12,10011,000
13,310
14,641
Present pay of
of annually Money
the rent for
48,042 Value expected withyears 5 if
9,9659,7839,6059,4309,259 interest for
the 2.33
at an