THE Standard Calculator for Finance Professionals

The Hewlett Packard HP 12C calculator has been in production for over twenty years. Over that period, it has become the most popular calculator for finance professionals. While not the most powerful of calculators--the HP 17 and 19 series both eclipse it, among others--its ease of use and collection of commonly used functions make it almost indispensable.

I know of what I speak. Over the length of my finance career, first as an MBA student in finance at the University of Chicago, then in the Treasury and Corporate Finance departments at a Fortune 20 firm, the financial services strategy practice at a consulting megafirm, and finally in the finance planning and analysis team at the world's largest financial service corporation, the HP12C was almost universally used.

That's why I'm puzzled by some of the reviews that pan this calculator. The 12C does what you want it to, when you want it to. When you need anything else, you go to Excel. Very simple.

But that brings us to the other part of our entertainment program: don't buy this calculator if you're not in the finance industry. It's not for grade or high school students. It's not for mathemeticians or scientists. It doesn't graph. It tells you present value and other stuff that I need to know in order to make my living.

The 12C is about 3 by 5 inches and requires three of those skinny little round batteries that you can pick up at Radio Shack or Walgreens. It's made of plastic and is virtually indestructible unless you take a sledgehammer to it. Mine is nearly twenty years old and I've been through hell with it, it's been dropped, stepped on, tossed, whatever, and still keeps on ticking.

The 12C offers the usually arithmetic functions, plus exponents, logs and natural logs, and recipricals. There are three data storage memories. Most keys have three functions, accessed either by pressing the key, or the "f" or "g" key to utilize the above and below functions.

One of the knocks against this calculator that I have seen in the other reviews is that it uses what is called "Reverse Polish Notation". TI and other machines use algebraic functions: to add 2 + 2, you hit 2, +, 2, =, and you get 4. On the HP, you hit 2, Enter, 2, + and get 4. While the point of this doesn't strike one at first, in complex calculations this procedure eliminates key strokes, permits one to see intermediate results, facilitates storage, and greatly simplifies calculations. It's far superior to standard usage.

So, take note: this is the first reason the calculator is designed for professionals (although I think most HP's are programmed with RPN).

The other reason is that its designed for professionals is, well, that's what it's there for. The functions are designed for someone who has professional knowledge of finance and needs a calculator for daily usage. The manual very clearly instructs the user how to use various formulae, but quite properly doesn't tell the user the theory because knowledge of the theory is assumed. One review actually complained about the lack of background provided. Amazing.

For the typical user, here's a selection of the critical functions, all very clearly explained:

Numerous Compound Interest Calcs
Time Value of Money
Net Present Value/Cash Flow Analysis
Internal Rate of Return
Percentages (including % changes from A to B, and percentage of calcs)
Bond Calcs--price and yield, along with various calendarization options
Statistics: Mean, Standard Deviation, etc.

There is a section on programming with detailed instructions on how to set up simple programs. I've never used it and I it's obsolete due to Excel. However, it might be convenient if you frequently use certain types of longer calculations.

There are a number of clearly written sections on how to apply certain finance formulas to the calculator. These are essentially telling the user which keys to use to get the end result and assume foreknowledge of the application. In other words, don't expect to be told the meaning of straight line depreciation.

There are a lot of specialized key functions that I haven't explained. The definitions are all in the book and they are quite clear.

In sum, the HP 12C is a reasonably priced, versatile calculator designed for people who work for a living in finance. That's why it's called the "HP 12C Programmable Financial Calculator". It's not as powerful as its 17 and 19 brethren, but I actually own a 19B and I NEVER use it because it's clunky and PDA's have made its data storage capabilities obsolete. Once you get used to RPN--and people in the business ARE used to it--it's a snap to use. What you can't do on this is why God made Excel.

PS For those so inclined, here is my review of the HP 19BII Business Consultant calculator, if you're really looking for horsepower and don't have access to Excel, Outlook, or a PDA. http://www.epinions.com/content_154381553284