Credit Management Flashcards
Late Payment Interest
Gross amount outstanding x (Bank of England base rate + 8%) x (No. of days late/ 365)
Gross profit margin
Gross profit margin = (Gross profit/Sales Revenue) x 100
Profit for the period margin
Profit for the period margin = (Profit/Sales Revenue) x 100
Return on capital employed
Return on capital employed = (Profit/Capital Employed) x 100
Return on net assets
Return on net assets = (Net Profit/ Net Assets) x 100
Net asset turnover
Net asset turnover = Revenue/Net Assets
Net asset turnover = Revenue/Capital employed
Current ratio
Current ratio = (Current assets/ Current Liabilities)
Quick ratio
Quick ratio = (Current assets – Inventories)/ Current Liabilities
Inventory holding period in days
Inventory holding period in days = (Inventories/ Costs of sale) x 365 days
Accounts receivable collection period
Accounts receivable collection period = (Trade receivables/ Sales revenue) x 365 days
Accounts payable payment period
Accounts payable payment period = (Trade payables / Cost of Sales) x 365 days
Working capital cycle
Working capital cycle = Inventory days + Receivable period – Payable period
Gearing ratio
Gearing ratio = (Total debt / (Total equity + Total debt) )x 100
Short-term debt ratio
Short-term debt ratio = (Short-term debt / Total debt) x 100
Interest cover
Interest cover = (Profit before interest/ Interest payable) x 100
EBITDA interest cover ratio
EBITDA interest cover ratio = EBITDA / Finance costs
EBITDA interest cover ratio = EBITDA / Interest paid
EBITDA to total debt ratio
EBITDA to total debt ratio = (EBITDA / Total Debt) x 100
Simple Interest Rate
Simple Interest Rate = ((d/100-d) x (365/N-D)) x 100
d = Discount percentage given N = Normal payment term D = Discount payment term
Compound Interest Rate
Compound Interest Rate ={ [(1+(d/100-d))^(365/N-D)] -1} X 100
d = Discount percentage given N = Normal payment term D = Discount payment term
Average Period of credit
Average Period of credit = (Receivables/ Sales revenue) x 365
