How to Use a Financial Calculator? (User Guide)

Generally, everyone might be aware of the use of commonly used calculators for simple arithmetic calculations. However, some calculations, especially related to Finance Management might be a bit complex.

For the students and working professionals in banking, insurance, real estate, and various other sectors related to finance, it would be essential to calculate various parameters and figures regularly. For such calculations, a financial calculator is preferred.

Important Uses of a Financial Calculator

There are different varieties in financial calculators. Some financial calculators combine the basic to advanced financial functions and additionally.

Some math and science-related functions as well. These are quite useful for the students and the working class.

The basic to high-end financial calculators prove to be very useful in various financial calculations. However, it is vital to understand and implement the functions clearly.

These devices can be of a great aid to the students appearing for the certifications in Financial Management, and different branches of Management Studies as well. Similarly, the professionals and entrepreneurs also need this device to simplify various complex operations.

Most of the users make effective use of the spreadsheets for their reports and records of various transactions.

However, the common use of financial calculators still plays an important role in various business operations.

The most important functions of a financial calculator are:

  • Payment calculations
  • Determining the rate of interest for various transactions
  • Calculations for determining the current or the upcoming value of a loan

Even the effective use of the financial calculators for these important functions needs some basic understanding of financial transactions and common sense as well.

There are several models of best financial calculators available on the market today. These models have various functions in common.

The financial calculators usually have five important keys that represent the ‘variables’ in various calculations:

  • N” key is used for a number of periods
  • I” key implies the periodic interest rate
  • PV” key stands for the Present Value
  • PMT” key is used to calculate the Payment
  • FV” key is used to calculate the Future Value

With the help of these function keys, it would be easier to make different types of financial calculations with the financial calculator.

You are supposed to find out the fifth variable, with the values of the remaining four variables in any calculation.

A simple example:

You can input a value, say 10,000 and press the ‘FV’ key

Then input 12 and press the ‘N’ key

Then enter 7% (rate of interest) and press the ‘I’ key

Input 0 and press the ‘P’ key

Now you have assigned the four values for the four different variables in the problem. Finally, when you press the ‘PV’ key, you will get the ‘Present Value’ as the solution to this problem.

Thus, the financial calculator would be very useful to calculate the premiums for your mortgage or any other types of loans, based on the rate of interest, the basic loan amount, the period for which the loan has been taken and so on.

So, the financial calculator helps you to save on your valuable time during explaining the schemes to the clients, understanding the own financial state during a loan and also for making the periodical financial reports of a business.

Use of various other functions:

The student community passionate about the certification examination in Finance Management would require a financial calculator that has graphing and scientific functions as well. Many device manufacturers offer intermediary to high-end financial calculator models that combine these functions.

Effective use of graphing functions:

The graphs help you to understand the financial status of a business in terms of periodical growth or even the money-flow illustration while repaying a loan or mortgage.

The problems these students normally solve would involve various variables and the graphing features would illustrate the overall transaction over the specified period, across the ‘X’ and ‘Y-axis.

This gives a clear idea regarding how the cash flow and the other parameters in the particular operations would practically work over the time frame.  

So, the graphing functions add to the simplicity of analyzing the problems and can bring you the solutions in a proper step-by-step manner.

Use of scientific functions:

At the same time, some scientific and mathematical concepts would also be involved in financial calculations.

The best example can be the use of calculus, trigonometry, and logarithm in finance-related problem-solving.

So, when you analyze the problem and set a method to solve it using the scientific or mathematical concepts such as determining square root, or use of integration, the scientific and mathematical functions on the financial calculator would help you to reach the solutions in the minimal possible effort and time.

Therefore, it is vital to understand and learn to make effective use of the graphing and scientific functions on the financial calculators to solve the problems effectively.

You can avail the tutorial videos from various manufacturers online that would provide a clear and in-depth insight in the use of these functions.

The factors that limit the use of financial calculators:

In the modern digital era, it is also important to understand the other widely used alternatives for financial calculators. However, these factors don’t exactly minimize the importance of possessing a good financial calculator.

  • Most of the students and professionals claim to use their laptops for their financial calculations. Many computer-based calculators are provided with the extra financial features.
  • Another option can be the spreadsheets used for the transaction records and actual calculations. Again, it is a separate learning process to understand the use of calculating functions in the software applications such as MS Excel, Stata and so on.
  • There are several financial calculator apps available on different platforms for various handheld devices. This can be another convenient alternative that many people would prefer.

However, the most important aspect here is the testing environment and the allowance to these devices.

Many authorities restrict the use of financial calculators that can store text. However, the basic to intermediate financial calculators are allowed to be carried while appearing for the exams.

Again, for the working professionals, the financial calculator can be a user-friendly and handy device to carry at the client’s location or even while working in the own office. So, it can be beneficial to get a suitable financial calculator for regular use.

Also check :- How to choose a financial calculator

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Hi, this is James. I'm a professional Finance Lecturer who finished college at Santa Clara University. I’m here to help you choose the perfect calculator for your financial needs. 

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