Finance Formulas / February 28, 2018 / Cecelia Weiss
Annual percentage rate (APR) is the annualized interest rate on a loan or investment which doesn’t account for the effect of compounding. It is the annualized form of the periodic rate which when applied to a loan or investment balance gives the interest expense or income for the period. In most cases it is the interest rate quoted by banks and other financial intermediaries on various products i.e. loans, mortgages, credit cards, deposits, etc. It is also called the nominal annual interest rate or simple interest rate.
Customer lifetime value can also be defined as the monetary value of a customer relationship, based on the present value of the projected future cash flows from the customer relationship. Customer lifetime value is an important concept in that it encourages firms to shift their focus from quarterly profits to the long-term health of their customer relationships. Customer lifetime value is an important number because it represents an upper limit on spending to acquire new customers. For this reason it is an important element in calculating payback of advertising spent in marketing mix modeling.
DuPont analysis is a fundamental performance measurement framework popularized by the DuPont Corporation and is also referred to as the "DuPont identity." DuPont analysis is a useful technique used to decompose the different drivers of the return on equity (ROE). Decomposition of ROE allows investors to focus their research on the distinct company performance indicators otherwise cursory evaluation.
Calculating the breakeven point is a key financial analysis tool used by business owners. Once you know the fixed and variable costs for the product your business produces or a good approximation of them, you can use that information to calculate your company's breakeven point. Small business owners can use the calculation to determine how many product units they need to sell at a given price point to break even.
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