The Financial Formulas at Work
Loan payments are amortisation, and amortisation is front-loaded. A fixed monthly payment splits between interest and principal, and early in the term the interest share dominates — you can pay for two years and be surprised how little the balance moved. The payment itself comes from the standard amortisation formula, which depends on principal, the periodic rate and the number of periods. The practical consequence: a longer term lowers the monthly payment while raising total interest paid, and the only way to see that trade honestly is to compute both.
Compounding rewards time more than rate. The future value and CD calculators apply compound growth, where each period's return earns returns of its own. The counter-intuitive part is how much compounding frequency matters at the margins and how much time dominates everything else — a modest rate over a long horizon routinely beats an impressive rate over a short one. Seeing the curve is more persuasive than being told.
ROI and cap rate answer different questions. ROI is a simple ratio — gain over cost, expressed as a percentage — and it deliberately ignores time, which is why a 50% ROI over ten years and over ten months are not comparable despite the identical number. Cap rate is the property world's equivalent: net operating income divided by property value, giving the annual yield on a building independent of financing. Both are quick screens, not full analyses, and both are more useful for comparing options than for judging one in isolation.
Markup and margin are not the same number. This trips up more new sellers than any other financial confusion. Markup is calculated on cost — a £100 item marked up 50% sells at £150. Margin is calculated on the selling price — that same £150 sale is a 33% margin, not 50%. Our markup calculator works from cost to selling price, and knowing which base you are working from is the difference between a healthy business and a slowly failing one.
Percentages do not stack the way people expect. A 20% discount followed by a further 10% off is not 30% off — it is 28%, because the second cut applies to the already-reduced price. Sales tax then applies on top of the discounted figure. The discount and sales tax tools apply these in the correct order rather than adding the percentages together.
Cost per use is a reframing, not a formula. Dividing purchase price by expected uses turns an intimidating upfront number into a comparable one — a £200 coat worn 100 times costs £2 a wear, while a £40 coat worn twice costs £20. The maths is trivial; the shift in perspective is the tool's actual value.