The post Payback Period (PBP) Formula | Example | Calculation | Analysis appeared first on Banking and Finance.

]]>**Payback period** is the financial budgeting method or capital budgeting method. It calculates the required number of days for investment to produce cash flow equal to the original cost of the investment. In other words, it measures the time of investment to earn enough money for the payment of itself or breakeven. For the analyzing of the risk on time base, this is the important measurement for the management.

If the investment takes much time to recoup its original amount then such type of investment will be a risky investment.

If the investment has a long payback period then it is said to be a less lucrative investment.

But with short time payback period company get payback sooner and can invest this cash into other operations of the company.

Longterm investment can’t be used for reinvestment as short term use by the company for reinvestment.

For the selection of desired payback management use the calculation of payback by using the below formula.

Payback period formula can be calculated by dividing the project cost by the annual cash inflows as

**Payback period = Project Cost/ Annual Cash Inflows**

By using the payback period calculator answer of the above formula will be in percentage form.

To arrive the number of days we need to multiply the 365, the company get a result of earning to pay itself.

For different periods like quarters, the semi-annual, annual, 2years project you can use this calculation.

John has a body shop. For the invest in the new equipment, he has 10,000 dollars.

In order to save the labour hour, John has the option to purchase the buffing wheel or bigger stand blaster to fit the part of the car.

He estimates that from this he can save 10 labour hours. Currently, John pays 25 dollars per hour to his finishing personnel.

Buffer generate 250 dollars per week which is the good enough income to pay for in 40week. Shop of John has the following payback calculation.

**40 week = $10,000/$250 per week**

If John purchases sand blaster then he can save 100 $ per week but the payback period for sandblaster is greater so he gives priority to buffer wheel for purchasing.

Management use payback period calculation to find how quickly the company gets payback on its investment.

In the above example, John has 2 choices of payback which are 100 weeks or 40 weeks. John chooses the 40-week investment because he earned money quickly from his investment and can reinvest this money again for their business.

Longer payback period is riskier as compared to the shorter payback. If the equipment of the company is break and company has a longer payback period then it is difficult for the company if it has not enough money to repair the equipment.

But with the short payback period the company collect the cash quickly and easily repair its equipment.

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**Operating leverage**

**Accounts payable turnover ratio**

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]]>The post Accounts Payable Turnover Ratio | Analysis | Formula | Example appeared first on Banking and Finance.

]]>**Accounts payable turnover ratio** is the liquidity ratio which is used to measure the ability of the company to pay off its account payable by comparing the net credit purchase to average account payable balance during the period.

It measures the ability of the company to pay off its suppliers and vendor due to which analyzers analyze the liquidity of any business.

Those companies which can easily payoff supplies throughout the year are good for investors and creditors. Because such types of companies easily make the principal amount and regular interest.

Accounts payable turnover ratio formula can be calculated by dividing the total purchases by average accounts payable for the year.

**Account Payable Turnover Ratio = Total purchases/Average Accounts Payable**

On the financial statement, total purchases number not available, so we can calculate this by adding the ending inventory to cost of goods sold and subtract the beginning inventory from it.

Most of the companies have no need for this calculation because these companies have the record of the supplier purchases.

As account payable vary throughout the year because of which in the above formula average accounts payable used.

It can be calculated by the sum of beginning and ending account payable and divide the result by two.

The high ratio of accounts payable turnover is better the low ratio. Because a high ratio indicates that the efficiency of the business is good to pay off its vendors.

Creditors and suppliers from the high ratio analyze that the company frequently pay off its bills.

From such type of companies, the new vendor can get paid back quickly.

For the comparison of the different companies in the same industries, this ratio is used. Because every industry has a different standard.

Lee is the building supplier which buy equipment of construction and material from a wholesaler.

Lee resells this inventory in its retail store to the general public.

From his vendors, Lee purchases 1,000,000 dollars of construction material.

At the balance sheet, Lee has 55,000 dollars beginning account payable and 958,000 dollars ending account payable.

**The payable ratio of Lee will be calculated as**

**1.97 = 1,000,000/506,000**

506,000 is the average account payable for Lee which is calculated by the sum of beginning and ending payable amount and divide by 2.

From the above result, it is clear that Lee pays his vendor back on every six month period.

The payable turnover ratio of Lee is not good enough but it can be compared with other companies in the industry.

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]]>The post Operating Margin Ratio | Analysis | Formula | Example appeared first on Banking and Finance.

]]>**Operating margin ratio** also is known as the operating profit margin. It is the profitability ratio which is used to measure the percentage of total revenue made by the operating income.

In order words, it calculates the overall left revenue after paying off all the variable or operating cost.

Conversely, it shows that how much revenue available to cover all the non-operating expenses like interest.

For the investors and creditors, this ratio is important because this ratio shows the efficiency of the profitability of the operations of the business. If a company make 30% revenue from its operation it means that the company runs its operation in a better way.

So the company have a good income for operating business efficiently. But if the company’s income decline then the company need to find a new income way.

Operating margin formula can be calculated by dividing the operating income by net sales.

**Operating margin = Operating income/Net sales**

Operating income is the income from operations. It is separately stated on the income statement from non-operating expenses like interest.

By subtracting the operating expenses, depreciation, and amortization from gross income or revenue, operating income can be calculated.

Operating profit margin shows the ability of business supporting its operations. Form the operations if the company make enough money then that company is a stable company.

But if for covering the operation expenses, both operating and non operating income require then the companies are not stable.

High operating profit margin is good as compared to the low operating profit margin. Because companies with a high margin have enough money from their operations to pay off its variable and fixed cost.

For every dollar, if the profit margin ratio is 30% it means that from every dollar, 30 cents remaining after the payment o all the operating expenses.

It also means that 30 cents left for the covering of non-operating expenses.

Bell has the jewellery store. He sells jewellery all over the country. On the financial statement, Bell has the following numbers.

- COGS = 500,000 dollars
- Net income = 100,000 dollars
- Wages = 100,000 dollars
- Rent = 15,000 dollars
- Other operating expenses = 25,000 dollars.

**Calculation of operating margin ratio for Bell is**

From the above result, it is clear that for every dollar sales bell use 64 cents to pay the variable cost. To cover non operating expenses only 36 cents remaining for Bell.

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]]>The post Operating Leverage Formula | Example | Calculation | Analysis appeared first on Banking and Finance.

]]>**Operating leverage** is the financial efficiency ratio. It is used to measure that how much percentage of total cost made from the fixed cost and variable cost. This calculation finds the efficiency of the company to generate the profit from its fixed cost.

As compare to variable cost if the fixed cost is higher then the leverage ratio of the company is high and the company generates more profit from each incremental sale.

If variable cost is high then the fixed cost, then the company is less leverage and make a small profit from its every incremental sale. In other words, if the ratio is high-cost ratio then the company make a high profit.

For the calculation of Breakeven point and for estimating the effectiveness of pricing structure managers use operating leverage. Due to effective pricing structure, the company may have a high economic gain because the company can control the demand by offering better products at a lower price. For the covering of fixed cost with profit, the company generates adequate sales volume. Whereas for covering the variable cost the company needs to increase its sales.

If the gross margin of the company is high then the company have high DOL ratio. Such type of company can make more money from its incremental revenue. High degree of operating leverage (DOL) incurs higher forecasting risks for the company because with the small mistake in the calculation sales may be lead to large miscalculation of cash flow. So for the company, it is necessary to make the good managerial decisions otherwise company lead to lower sale revenue.

Operating leverage formula can be calculated by multiplying the quantity with the difference between price and variable cost per unit and divided it by multiplying the quantity with the difference between price and variable cost per unit and divided it by multiplying the quantity with the difference between price and variable cost per unit minus fixed operating cost.

If the above equation breakdown then it shows that the DOL is expressed by relation b/w price and variable cost per unit quantity. In general term, we can write the above equation as

**The degree of Operating Leverage = ( Sales – Variable )/Profit**

To adjust the pricing structure to the high sales of the firm manager monitor DOL. If there is a small decrease in the sale it may be the cause of a decrease in the profit.

Mic has a leading software business. He mostly incurs the fixed cost for the development and marketing of the business. The fixed cost of Mic is 78,000 dollars which go in the salaries of the developer and cost per unit is 0.08 dollars. For each 25 dollars company sales 300,000 units. In the marketing, sales and development this business involved which have the application, customize software for the enterprises from the network system and operating management tools.

Operating leverage for Mic’s business by using fixed cost and variable cost calculated as

**112% = [30,000 x (25 – 0.08)]/ [30,000 x (25 – 0.08)] – 78,000**

It means that by increasing the 10% sales profit increase 12%.

For 20 dollars each if the company increase sales to 450,000 units then Dol will be calculated as

**110% = [45,000 x (20 – 0.08 )]/ [45,000 x (20 – 0.08 )] -78,000**

From the above result, we can say that if we increase 10% in sales then the profit increase by 11%. In sales, the company generates more revenue1,527,000 dollars. So by lowering the price sales revenue increase and cost remain unchanged.

Impact of operating leverage on the EBIT of the firm shown by the degree of the operating leverage. For the assessment of the core operation’s fixed and variable cost of business, DOL is important.

If the company has a high degree of operating leverage then the company has more fixed cost as compare to variable cost. So the business has more fixed assets to support its core business. It also means that the company makes more money from its additional sales by keeping the fixed asset of the company intact. When the company has a high margin with fewer sales it means that the company has high DOL. Without incurring of high costs, the fixed asset of the company acquires higher value as a result. At the end of the day, the profit margin of the firm can expand at a faster rate as compared to sales revenue.

If the company has low DOS it means that the company has less fixed cost as compared to the variable cost. Such type of company useless fixed cost to operate core business activities and has low gross margin.

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]]>The post Operating Income Formula | Definition | Calculator | Example appeared first on Banking and Finance.

]]>**Operating income** referred as EBIT. It is the profitability ratio which is used to calculate the profit of the company derived from operations.

In other words, this is used to measure the money which is making by the core activity of the business not included other income expenses.

Analysts and investors used this ratio to find, how well the performance of the core activities of the business.

This ratio separates the operating and non-operating expenses and revenue to shows clearly for investors and creditors that how the company makes money.

If the business shows a high profit, it does not indicate that the business is healthy. Because when business loss its customers and downsizing then it liquidate its business which realizes that the business has high gain.

In this case, core activities are in lose but seeling of assets make money, so the business is not healthy.

For the evaluation of the performance in present as well as forecast future performance, investors and analysts use the operating income calculation.

Operating income formula can be calculated by subtracting the operating expenses, depreciation, and amortization from the gross income.

** Operating Income = Gross Income – Operating expenses – depreciation and amortization**

Gross income is also called gross profit. It can be calculated by subtracting the cost of goods sold from the net sales. All the cost of running core business activities associated with operating expenses. Some operating expenses listed below

- Rent
- Insurance
- Utilities
- Wages
- Commission
- Freight and postage
- Supplies Expense

In the above list depreciation and amortization also included which use in the operating income equation.

Bob has the sandwich shop which makes sub and grinder. He working on refinancing with his current loan with the new bank. So Bob has multiple-step income statement to prepare with detailed operations.

Bob sold 200,000 dollars of sub during 1 year. Expenses of Bob listed below

- Cost of goods sold = 35,000 dollars
- Wages = 50,000 dollars
- rent =12,000 dollars
- Utilities = 5,000 dollars
- Insurance = 10,000 dollars

Bob has a car accident, the insurance company did not cover his damage then he reported damage fro the car is 50,000 dollars. He calculates operating income as

**$88,000 = $165,000 – $77,000 – $0**

Bob get the profit of 88,000 dollars by subtracting all the operating expenses from net revenue. In the above calculation loss of car accident not included because it is a non-operating expense.

To find the efficiency, profitability and health of any business investors and creditor use this calculation. It calculating the operating income from core business activity. So higher operating income is the indication of the health of the company.

For the future scalability of the company analysts and investors use this calculation. If the company as a positive number then for the investment company is more suitable, but with a negative number, the company is not suitable for investment.

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]]>The post Operating Cash Flow (OCF) Formula | Example | Calculation appeared first on Banking and Finance.

]]>**Operating Cash Flow** is called cash flow from operation. It is the efficiency calculation which is used to measure the cash which a company produce from its operation and measure the business activity by subtracting the operating expenses from total revenue.

OCF shows that the operation of the company produces how much cash without regard to interest or investment.

For example, a manufacturing company sells product and make more money as compared to the expenses of the product.

In other words, cash outflows must be less than cash inflows so that the company is profitable and easily pay its bills.

Investors and creditors use OCF to find the status of the company whether the company is successful or not. Investors find that the company can make enough money from the operations of the company to maintain and grow the company or operation of the company can’t make enough money. This is an important concept because it shows the health of the company.

Public companies report this number on a quarterly financial statement or annual financial statement to find the health of the company.

Operating cash flow (OCF) formula can be calculated by subtracting the operating expenses from total revenue.

**Operating Cash Flow = Total revenue – Operating Expenses**

The above equation of operating cash flow is so simple to calculate but it does not give the information of cash, cash source, and operation of the company. That’s why GAAP requires the companies to use the indirect method of calculating cash flow from operations.

For the indirect method OCF equation adjust the net income for changing in the noncash account on the balance sheet. After the adjustment of it in the account receivable and inventory, depreciation and amortization added back in the net income.

** Operating cash flow = Net Income +/- Changes in Assets and Liabilities + Noncash Expenses**

As compared to direct method OCF formula this is a complicated formula but it gives more information about the operation of the company.

Now we take the operating cash flow (OCF) example to understand this in a better way.

Now we take the example of Maria’s guitar shop. Her main competition is guitar center and she want to analyze the way through which she can improve her business. At the end of the year her financial statement shows the following numbers.

**Net income = 100,000 dollars****Depreciation = 10,000 dollars****Change in account receivable = 50,000 dollars****Change in account payable = -25,000 dollars****Change in inventory = – 20,000 dollars**

Due to the conversion of the accrual net income into the cash basis net income indirect method confusing. So increasing in the assets must be subtracted and decreasing in the assets must be added back in. It is so confusing in the term os assets so we take this in cash form for better understanding. If the inventory goes down it means that it converts into the cash So decreasing in the inventory must be added back in the form of cash to net income.

Here we calculate the operating cash flow of Maria’s shop

**$55,000 =$100,000 – $50,000 + $20,000 -$25,000 +$10,000**

From the above result, it is clear that Maria generates 55,000 dollars from her operations. So left amount after the paying of bills at the end of year Maria has 55,000 dollars. She can invest this amount for new business or reinvest in the current business.

Mostly analysts compare the cash flow number with other ratios. Many ratios can easily be manipulated by the management but cash flow ratio cannot be easily manipulated by the management. The company earned cash and spend cash. Analyst like to analyze the cash flow of the company because through this, analysts easily see the area of the operation which has the problem.

If the net income of the company is high but OCF is low it may be due to the bad receivable performance from the customer. It may be because of the high revenue gain by the company but reduce it with accelerated depreciation on the income statement. Since depreciation added back in the net income in operating cash flow calculator, accelerated depreciation does not affect the operating cash flow.

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]]>The post Net Operating Profit After Tax (NOPAT) | Formula | Example | Calculation appeared first on Banking and Finance.

]]>**Net Operating Profit After Tax (NOPAT)** is the profitability measurement which is used to calculate the theoretical cash of the company which company distributes among the shareholders of the company if the company has no debt.

In other words, NOPAT is the profit amount from the operation of the company after tax payment without regard to interest payment.

If the company have no obligations then the company can distribute the total money among the shareholders.

Creditors and investors use NOPAT to find the efficiency of the company to pay its current obligations and pay to its shareholders. This is used only as a gauge because it does not give an accurate measurement.

Accrual method of earning creating the time difference between earnings are recognized for book purpose and earning are recognize or tax purpose. SO there is the difference between the calculated amount and the amount which is distributed among the shareholders.

To find the profitability of the company for the operations of the company analyst use this ratio. To find the operating efficiency of the company this ratio give the accurate result.

NOPAT formula can be calculated by the product of operating income of the company and 1 minus corporate tax rate.

If the detailed income statement is not available and the net operating income cannot figure out then we need to use net income by backing out the interest payment as below.

**Net Operating Profit After Tax (NOPAT) =Net profit + Net Interest x (1 – Tax rate )**

It is the simple formula as compared to the above of this. Because operating profit, net income and interest expenses available on the income statement through which we can calculate NOPAT.

Now we take the example of the light bulb manufacturer which report the below-listed items on the income statement.

**Operating profit =$50****Tax rate = 30%**

From this, we can calculate NOPAT by putting in the NOPAT formula as

**NOPAT = 50 x ( 1 – 30% ) = 35 dollars**

If we use the second equation of NOPAT then we need net income and net interest for calculation of NOPAT. By putting the values of these after the calculation then we get the same result of 35 dollars from it also. Both equations of NOPAT give the same result if the company have no debt to pay off.

For any business operating profit and net profit are 2 important parameters. Operating profit is used to find the operating efficiency of the business whereas net profit tells how much overall profit company gets. In the operating profit, the tax amount is not included whereas in the net profit tax amount include.

NOPAT is the operating profit after the reducing of taxes. Without debt the operating performance of the company calculated by the Hybrid calculation of NOPAT.

On a standalone basis, the analysis of any ratio or number is not useful. For better result, you need to compare the history of the company with others in the industry. Through historical analysis, the analyst knows that the performance of the company improve or not and peer analysis shows that how the company stakes within the peer set in term of operational efficiency.

There are some reasons because of which NOPAT increase or decrease for some companies for 2 years or above. The changes in the result may be due to the operating margin or changing product mix etc.

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]]>The post Net Working Capital Formula | Example Calculation | Ratio appeared first on Banking and Finance.

]]>**Networking capital ratio** is used to measure the ability of the company to pay off its current liabilities with current assets.

For the management, general creditor, and for the Vendors NWC calculation is very important because this ratio shows the short term liquidity of the firm and also NWC used to find the efficiency of the management to use the assets of the firm.

Lie working capital ratio, net working capital (NWC) formula focus on the current liabilities of the business such as account payable, trade debt, and vendor notes that must be repaid in the current year.

Through these investors and vendors find how much current assets are available in the company which may be converted into cash for the payment of liabilities which are due for the next 12 month.

For the payment of the obligation of the company, if the company has not enough current assets then company forced to sell its long term assets or income producing assets for the payment of the current obligation.

Net working capital, NWC formula can be calculated by subtracting the current liabilities from the current assets f the business.

** Net Working Capital = Current Assets – Current Liabilities**

Current assets in the net working capital are cash, account receivable, inventory, and short term investment.

In the net working capital, current liabilities include account payable, customer deposit, taxes, and other trade debt.

Now we take the example of Lara’s clothing store. Current assets and liabilities for Lara’s store are listed below.

- Cash = 10,000 dollars
- Account Receivable 5,000 dollars
- Inventory = 15,000 dollars
- Account payable = 7,500 dollars
- Accrued expenses = 2,500 dollars
- Other trade debt = 5,000 dollars

From net working capital (NWC) calculator Lara can calculate the measurement like this

From the above result, it is clear that the current assets of Lara are greater than the current liabilities.

NWC for the Lara is positive so for the short term his store is very liquid because of which he can expand his business or invest into new business.

Positive Net WC is better than Negative WC because positive net WC shows that the company has more current assets than its current liabilities. From the positive net WC, investors and creditors know that the company can easily pay off its current obligations through its operations.

If the measurement is large positive it means that the company can expand its business without taking debt or investors.

If the networking capital of the company is negative then it shows to investors and creditors that, the company not producing enough to support the current debt of the company.

Because of the negative number company needs to sell its long term assets or income producing assets for the payment of the current obligations of the company. If the negative trend of the company continues then company declaring bankruptcy.

The positive number is better than the negative number in net WC. Negative numbers don’t indicate that the company is going under. it means that the short term liquidity of the company is not good.

For the creation of sustainable business, there are many factors. For example, if the company convert more of its inventory into cash it not means that the company Has a positive number. If the current assets are greater then liabilities then the company has a positive number.

A company with positive NWC not considered the positive view if its trend down day by day. Whereas a company with negative NWC considered as a positive view if its trend improves day by day.

Many people ask ” how does a company change its net working capital over time?” For the improving of the liquidity of the company, there are 3 main ways.

First is the company can decrease its receivable collection time.

In the second step, the company can reduce the amount of carrying the inventory by sending back unmarketable goods to suppliers.

For long account payment term payable company negotiate with vendors and suppliers in the third step.

These 3 steps improve the short term liquidity of the company.

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]]>The post Net Profit Margin | Formula | Example | Calculator appeared first on Banking and Finance.

]]>**Net profit margin** is the profitability matric which is used to measure how much net income a company earned from its each dollar sales.

Investors and analyst used NPM ratio to measure the efficiency of the company to measure the management and forecast future profitability on the base of the sales forecast of the management.

Investors compare net income to total sales to see that what percentage of revenue used for the operating and not operating expenses, and what percentage of revenue used to pay shareholders or reinvest in the company.

As compare to low margin high margin is better. Because with high margin the company can easily convert more of its sales into cash at the end of the year or period. Between the industry the margin change drastically.

Net profit margin formula can be calculated by dividing the net income by total revenue.

The calculation of net profit margin is so simple because from the income statement we easily get the values and put in the above formula to calculate the NP margin. Total revenue is the money which is earned by the company through its operations during the period.

After the payment of all the expenses, leftover income during the period is called net income.

For the better understanding of net profit margin calculation, we take the example.

Under the same industry company X, Y, and Z working. Income statement of these companies shows the following report.

On the basis of net income, we can compare company X and company Y but it does not tell the profitability’s entire story. The income statement shows that company Y is more profitable then company X, and company Z.

According to income statement company, X and company Z get equal profit so these have the same profitability.

Now we take the profit in dollar amount to know the revenue generated by these companies.

Now to find the profitability of these companies separately by using the NP margin equation.

From the above result it is clear that Company X and Z has the same net profit margin whereas Company Y has 10% greater NPM then company X and Y.

Net margin is one of the most useful measurements in financial measurement if compared to the history of the company.

Through historical analysis of any company, we analyze that the profitability of the company is increasing or decreasing. From the trend analysis, we can find the sustainability of the company. If the margin is decline then it may be due to the high competition, reduced bargaining power, or inefficient cost of the company.

We can compare the margin of those companies through NPM equation which works under the same industry. Because different industries have different cost base.

For the understanding of the driver of margin analysts striping down the various elements of NP margin. This ratio is used to analyze its impact on the return measures such as ROE and DuPont analysis.

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]]>The post Net Present Value (NIV) -Calculator | Formula | Example Explanation appeared first on Banking and Finance.

]]>Definition: **Net present value (NPV)** is the capital budgeting formula which is used to measure the difference between the present value of cash inflows and outflows of potential investment or project.

In other words, the net present value is the amount of money which an investment generated by comparing with cost adjusted for time value of money.

The concept of NPV is the most important concept because the worth of 1 dollar at the present time is greater than the future time 1 dollar because of the interest and opportunity cost.

For the making of the investment decision sophisticated investors and the management of the company use the discount cash flow metrics or use the present value analysis.

The formula of Net present value (NPV) is complicated because for the calculation of this sum of all the future cash flow from investment, discount them at discount rate, and then subtract the initial investment from this.

**Ct represents net cash flow for the period.****CO represents an initial investment****r represents the discount rate****t represents the number of periods in the above formula.**

For a better understanding of the NPV, we use the nonmathematical equation.

From the above equation, we can say that NPV is equal to the difference of PV of initial investment and PV of the money which the investment will make in future.

Management uses the net present value of the potential project of the company, expansion of business, new equipment to evaluate that what option is the best and in the future which is the best path which company takes.

Now we take the example of the manufacturing company which wants to expand its business But for this company does not have enough equipment. In this case, the company use the Net price value (NPV) calculator to find that the machinery purchasing is a good investment or not. It can get by comparing the amount of the cash inflows new machinery generating with the initial cost of the machinery.

If the NPV give the positive number it means that the future cash flow of the project is greater then the initial cost. So the company gets money on its investment. But if the NPV result the negative number it means that the future cash flow of the project is less then the cost of machinery on which purchasing company invests.

If the number in the result of NPV is positive and much high then company earn much more then the initial cost of the machinery. This ratio can be used to evaluate to project to find that which is the best project for the investment.

Tom has a construction company which builds the small building. He wants to expand his business and want to construct the large building for which he needs the crane. The price of the crane is 100,000 dollars. He estimates that he can earn each year 20,000 dollars from this crane for the next 10 years.

So after 10 years, he will get 20,000 dollars money after 10 ears from his 100,000 dollars investment. For the time value of money to adjust 200,000 dollars is not discounted.

If the interest rate is 10% then the discounted cash flow from the crane will be 122,891.34. Now we calculate the NPV for the investment of Tom.

From the above result, it is clear that Tom not 100,000 dollars because when time value of money adjusts then he makes only 22891.34 dollars. The above result is the good result because it is in positive number and Tom makes money on its investment.

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