# Formulae in Commerce Subjects

P V Ram , 07 March 2014

A Formula is a simple way of expressing information. These are usually used in Science and Mathematics apart from commerce areas.  Further, more often these are expressed in the form of equations.  This implies that a given set of inputs under given situations or assumptions will result consistently in a defined output. As the inputs are changed, the output will also vary in tandem as per the relations expressed in formula.  Formulas can also be expressed in the form of simple combination of symbols e.g. NH3 for Ammonia indicating that it is a combination of Nitrogen and Hydrogen.

In Commerce, formulae are used in several areas like Interest and Annuity calculations, Capital Budgeting, Portfolio Management, Standard Costing, Marginal Costing, PERT Analysis, Learning Curve effects etc. In commerce areas, unlike Science and Mathematics, the derivations and proving of formulae is of not much importance nor ever asked in examinations.  What is required is the awareness of the formula with all its components, nomenclature and meanings of the terms used in it. More important thing is the areas where formulae can be applied and the assumptions under which they hold good is also required to be known.

When formulas are expressed in the form of equations they help in finding the value of the unknown variable, given the rest of the variables and the result.  This helps us in doing iterations and performing sensitivity analysis and “what if?” analysis.  Formulae can be used in spread sheet computations also to express relationships and their inter linkages.

Formulae help in solving the problems in a faster and simple way.  Further, we can devise shortcuts as well through which we can save lot of time and laborious workings.  Very often, I come across with students saying that they have mugged up all the formulae but yet not able to solve the problems in examinations.  This is something like that a person who knows all the alphabets from A to Z wants to claim that he is an expert in English literature.  It is not just sufficient to know the formula. As said earlier, it is also required to know all its components, their nomenclatures, the areas where they can be applied and the more important thing is the underlying assumptions under which they can be used.  Students are required to be familiar with these aspects to fully enjoy the luxury of formulas through which they can save time and laborious workings.  This can be achieved by following two things.  Firstly, you need to understand the theory of respective areas of the formulae and secondly, solving several varieties of problems using the formulae and practicing them.  This principle holds good for mnemonics also.  In this case you must be able to write atleast few small sentences though not a big paragraph by recollecting a single letter or word.

Students are suggested to study the theory of the subject well and understand it fully.  When formulas are come across they need to jot down the formulae along with their nomenclature at a single place for quick reference.  They need to solve as many problems as possible.  After doing this they can memorise the formulae.  Further, if you start memorising formulae after studying theory well and solving problems, it will be very easy to understand, remember and apply them.  In fact, in this method, some of the formulae would have already got registered in your brain and do not require the effort of memorising also.

Thanks!

P V Ram

B.Sc., ACA, ACMA.

Coaching aspiring CAs’ and CMAs’

P V Ram
(Offering Coaching for CA, CMA aspirers)
Category Students   Report

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