Study guide: Financial Math Essentials

📋 Course Outline

1. Pricing and discounts
2. VAT calculation
3. Interest, profit, loss and trading

📖 1. Pricing and discounts

🔑 Key Concepts & Definitions

• Selling price: The selling price is the price charged after adding mark-up or other adjustments to the cost price.
• Discount: A discount is a reduction from the marked or original price applied when items are on sale.

📝 Essential Points

• To find the selling price, start from the cost price and apply the required pricing relationship given in the question.
• To work out a discount, calculate how much is taken off the sale price using the stated discount amount or rate.
• You can calculate 10%, 25%, and 50% discounts on items on sale by taking the stated percentage of the relevant price.
• The final sale price is the original price minus the discount on that item.

💡 Memory Hook

Discounts mean “take off”: Final price = Original price − (discount % × original price).

📖 2. VAT calculation

🔑 Key Concepts & Definitions

• VAT charged: VAT charged is the tax added to goods on sales, shown as a VAT amount on sales dockets.
• VAT: VAT is a tax on consumption where the charged amount is recorded separately from the product price.

📝 Essential Points

• In Fiji, VAT charged must be identified and its meaning understood as a tax added to sales.
• On sales dockets, read the VAT amount charged to determine how much VAT was applied to the sale.
• To calculate VAT on any product displayed, use the VAT charged information and the product’s displayed price data given in the question.
• VAT calculation problems require you to separate the VAT charged from the non-VAT product price when asked.

📖 3. Interest, profit, loss and trading

🔑 Key Concepts & Definitions

• Simple interest: Simple interest is interest calculated only on the original principal over the interest period(s).
• Compound interest: Compound interest is interest calculated on the principal and on any accumulated interest for later periods.
• Profit and loss: Profit is the gain from a sale compared to the cost, while loss is the shortfall compared to the cost.

📝 Essential Points

• You should explain simple versus compound interest and calculate interest for given amounts.
• You may be given situations where simple or compound interest is charged and must choose the correct method.
• Profit on sales is found by comparing the sales amount to the cost, and loss is found when the sales amount is lower.
• For a small organisation, record sales and purchases and calculate interest involved when goods are obtained through hire purchase, monthly instalments, or a bank arrangement.

⚠️ Common Pitfalls & Confusions

1. Students often apply the discount to the cost price instead of the correct price stated in the question for the discount.
2. Students may treat VAT as if it were included or excluded incorrectly, mixing up whether the given price is before VAT or includes VAT.
3. Students frequently use the simple-interest method for problems requiring compound interest, or vice versa.
4. Students may calculate profit as sales minus cost but then use the wrong comparison direction, turning a profit into an incorrect loss calculation.
5. Students sometimes record purchases and sales for an organisation without keeping the correct distinction between the two lists, which breaks later totals.
6. Students may calculate interest on the wrong base amount (principal vs principal plus accumulated interest) in compound interest questions.

✅ Exam Checklist

1. Calculate selling price based on the given cost price using the relationship required by the question.
2. Compute a discount on items on sale from the stated discount amount or discount rate.
3. Calculate 10%, 25%, and 50% discounts accurately on the relevant item price.
4. Find the final sale price by subtracting the discount from the original price.
5. Identify VAT charged in Fiji and explain what VAT represents in a sales transaction.
6. Read the VAT amount shown on a sales docket and use it to answer related questions.
7. Calculate the VAT for a product using the VAT method and displayed price information provided.
8. Explain the difference between simple interest and compound interest.
9. Calculate simple interest for the given principal, rate, and time period(s) as required.
10. Calculate compound interest for the given principal, rate, and compounding period(s) as required.
11. Calculate profit gained on sales by comparing sales amount to cost, and calculate loss when sales amount is lower.
12. Record sales and purchases for a small organisation to support later calculations.
13. Calculate interest paid when purchasing goods via hire purchase, monthly instalments, or a bank arrangement as described in the question.