# About Formal Construction of Financial Analysis

• Alfonso M. Rodríguez
Chapter
Part of the Studies in Systems, Decision and Control book series (SSDC, volume 125)

## Abstract

The conventional Financial Mathematics is, principally, financial calculi. Nevertheless, the financial phenomenon, the preference for liquidity, it would must be always present into the temporal economic studies. The financial value considers, joint the monetary amount, its temporal deferral, its liquidity. Both of them must be formalized in a binary vector (C, T), the financial capital, reclaiming different mathematic that financial conventional simply arithmetic (scalar). The financial analysis reclaims the vector Financial Mathematic that we propos. Financing financial operations (FFO) and investment financial operations (IFO) are very different financial operations (FO) by their purpose. FFO only pretends to get an interest, the financing price by its financial service. IFO intents to get an investment yield, its economic result. Interest and investment yield are different economic magnitudes. The interest is appointed by a financial market and it defines the financial equilibrium of FFO (finance equivalence). The investment yield is an economic result appointed by the financial disequilibrium of IFO. It is the reason why to Investigate an investment yield as a financial equilibrium, as an implicit interest, it is the grave financial mistake that IRR (Internal Rate of Return) commits, confusing investment yield with interest and an IFO with a FFO, with erroneous consequences to its definition and possible to investment decisions. The new methodological Financial Mathematics permits to revise conventional concepts as interest, investment yield, financial productivity, financial profitability, etc. also permitting to incorporate another unknown concepts as financial degeneration, financial immunity, etc, and to know other financial instruments, alternative to IRR, to investment decision.

## Keywords

Financial mathematics Mathematic of financing Mathematic of investment Financial laws Financial regimes Financial operations (FO) Financing operations (FFO) Investment operations (IFO) Internal rate of return (IRR) Financial immunity Financial degeneration Financial decision

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