The document defines key business math terms: 1) Inventory includes a company's raw materials, finished goods, and goods in production that have not been sold. 2) Depreciation allocates the cost of tangible assets over their useful life for tax and accounting purposes. 3) Principal is the amount borrowed or still owed on a loan, separate from interest. 4) Interest is the fee charged by a lender for the use of borrowed money, usually expressed as an annual percentage of the principal.

1. Ladiao, Nieva Rose A. BSHRM-2A
July 04, 2012 Business Math
Define the following briefly:
1. Inventory
2. Depreciation
3. Principal
4. Interest
5. Commission
6. Simple Interest
7. Exact Time
8. Approximate Time
9. Compound Interest
10. Percent
1. Inventory – A company's merchandise, raw materials, and finished and
unfinished products which have not yet been sold. These are considered liquid assets,
since they can be converted into cash quite easily. There are various means of valuing
these assets, but to be conservative the lowest value is usually used in financial
statements.
2. Depreciation - A method of allocating the cost of a tangible asset over its useful life.
Businesses depreciate long-term assets for both tax and accounting purposes. Or a
decrease in an asset’s value caused by unfavorable market conditions.
3. Principal - The amount borrowed or the amount still owed on a loan, separate from
interest. And it’s also the main party to a transaction, acting as either a buyer or seller
for his/her own account and risk.
4. Interest - The fee charged by a lender to a borrower for the use of borrowed money,
usually expressed as an annual percentage of the principal; the rate is dependent upon
the time value of money, the credit risk of the borrower, and the inflation rate. Here,
interest per year divided by principal, expressed as a percentage. Also called interest
rate. Or Partial or Total Ownership in an asset.
5. Commission – The authority given to a person or organization to act as an agent to a
principal in commercial transactions. And it also the fee allotted to an agent for services
rendered.
6. Simple Interest - A quick method of calculating the interest charge on a loan. Simple
interest is determined by multiplying the interest rate by the principal by the number of
periods.

2. Where:
P- is the loan amount
I- is the interest rate
N -is the duration of the loan, using number of periods.
7. Exact Time - makes it possible to define allowed range of time in a relative-to-now plus-
minus basis instead of exact time period.
8. Approximate Time - Almost exact or correct.
9. Compound Interest - Interest that accrues on the initial principal and the accumulated
interest of a principal deposit, loan or debt. Compounding of interest allows a principal
amount to grow at a faster rate than simple interest, which is calculated as a percentage
of only the principal amount.
10. Percent - is as a ratio that shows a part of a whole. The technical name for the whole is
base.