The Annual Equivalent Rate, within the scope of finance, is one of the indicators used to evaluate and present the economic profitability of a company. This is done in percentage figures, which are established within a normally annual period. In order to perform the calculations corresponding to the APR, it is necessary to know the annual interest rates, the company's expenses, the commissions delivered throughout the year, the payments and the income; This, later, would serve as the basis for carrying out the operations, since each of the elements have different capitalization times, changing their value over time., so they would be complex equations of interest.
Together with the Nominal Interest Rate, TIN, financial analysts can allow themselves to study the economic growth of a specific company. Through the homogenization of expenses such as settlements, expenses, commissions and payment of salaries and social security, which in total would be treated as annual interest. The values of the Annual Equivalent Rate may vary for the fixed annual nominal rates, in case the number of capitalizations that occur per year or although the expenses and payments increase. In some countries, the inclusion of APR data is mandatory when requesting loans or carrying out some type of.
Calculating the Annual Equivalent Rate is simply finding the annual interest rate, starting from compound interest. When the data is already available, the interests must be remunerated at the interest rate with which you are working. It should be noted that, as already mentioned above, you must have information on company expenses, which may vary according to the sector where they are located and the regulations imposed by the entity provided.
