DSST Business Mathematics flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Rounding to a place value

Locate the digit in the place being kept, then look at the single digit immediately to its right. If that digit is 5 or more, increase the kept digit by one; otherwise leave it unchanged and drop the rest.

Dividing by a fraction

Multiply by the reciprocal of the divisor. For example, 3/4 divided by 2/5 equals 3/4 times 5/2, which is 15/8 or 1.875.

Weighted average formula

Multiply each value by its weight, sum those products, then divide by the sum of the weights. Use it when items occur with different frequencies instead of treating every value equally.

Splitting an amount by ratio

Add the ratio parts to get the total number of parts, divide the amount by that total, then multiply each ratio part by the result to obtain each share.

Percent change

Subtract the old value from the new value, divide by the old value, then multiply by 100. A positive result is an increase; a negative result is a decrease.

Reading a pie chart share

Divide the category value by the total of all categories to get its share. Multiply that share by 360 degrees to find the sector angle; one percent equals 3.6 degrees.

Truncated axis distortion

A graph whose vertical axis starts above zero exaggerates differences between bars or line segments. Always check where the scale begins before comparing magnitudes visually.

Slope as rate of change

On a line graph, the slope of a segment equals the vertical change divided by the horizontal change. It reports the average change per period over that segment.

Simple interest formula

Interest equals principal times annual rate as a decimal times time in years: I = P times r times t. The maturity amount is P times (1 plus rt).

Ordinary versus exact interest

Ordinary interest uses a 360-day year, while exact interest uses 365. For the same number of days and rate, ordinary interest is slightly larger.

Solving for simple interest rate

Rearrange I = Prt to get r = I divided by (P times t). Time must be expressed in years, so months are divided by twelve before substituting.

Compound amount formula

A equals P times (1 plus i) raised to the n, where i is the annual rate divided by compounding periods per year and n is years times periods per year.

Effective annual rate

The true yearly yield after compounding: (1 plus r divided by m) raised to m, minus 1. Compare competing nominal rates using this figure, not the stated rate.

Rule of 72

Approximate doubling time in years equals 72 divided by the annual percentage rate. It is reasonably accurate for rates between roughly five and twelve percent.

Present value discounting

P equals A divided by (1 plus i) raised to the n. This reverses the compound amount formula and converts a future sum into its value today.

Future value ordinary annuity

FV equals the payment times the quantity (1 plus i) to the n minus 1, all divided by i. Payments occur at the end of each period.

Annuity due adjustment

When payments occur at the beginning of each period instead of the end, multiply the ordinary annuity value by (1 plus i) to shift every payment one period earlier.

Sinking fund payment

The deposit per period needed to reach a target sum equals the target times i, divided by (1 plus i) to the n minus 1.

Amortization schedule behavior

Each loan payment first covers interest on the remaining balance; the rest reduces principal. As the balance falls, interest shrinks and principal repayment grows.

Net pay

Net pay equals gross pay minus all deductions, both mandatory and voluntary. Gross pay is earnings before any withholding, tax, or benefit deduction.

FICA employee rates

Social Security is 6.2 percent of gross wages up to an annual wage base; Medicare is 1.45 percent of all gross wages with no cap for the employee share.

Overtime gross pay

Hours beyond the standard forty in a week are typically paid at 1.5 times the regular hourly rate. Total gross equals regular earnings plus overtime earnings.

Series discount net price

Multiply the list price by (1 minus each discount rate) in succession. Never add the rates; 20 percent then 10 percent yields a single equivalent discount of 28 percent.

Markup on cost versus price

Markup on cost divides the markup by cost; markup on selling price divides the same markup by selling price. The dollar markup is identical, only the base differs.

Cash discount terms

Terms such as 2/10, n/30 mean a 2 percent discount applies if the invoice is paid within 10 days; otherwise the full net amount is due in 30 days.

Straight-line depreciation

Annual depreciation equals cost minus salvage value, divided by useful life in years. Book value equals cost minus accumulated depreciation at any point.

Double-declining balance

Each year multiply the opening book value by twice the straight-line rate. Salvage value is ignored in the rate but the asset is never depreciated below it.

Net worth

Net worth equals total assets minus total liabilities at a point in time. It can be negative when obligations exceed the value of everything owned.

Preferred versus common stock

Preferred stock usually pays a fixed dividend on par value and carries no vote; common stock votes for directors and receives residual dividends after preferred claims.

Earnings per share

Divide net income by the number of common shares outstanding. It expresses profit on a per-share basis and feeds the price-earnings ratio.

Inventory turnover

Cost of goods sold divided by average inventory, where average inventory is the mean of beginning and ending balances. Days in inventory equals 365 divided by turnover.

Total asset turnover

Net sales divided by average total assets. It measures how many dollars of revenue each dollar of assets generates during the period.