A little bit of help with ratios please.

Haysah

:001_unsure: Could any one please explain what the ratio, No credit Interval is actually showing??

I can work the ratio out fine but need to know exactly what is represents. Confused. com

Haysah

what it represents.

SandyHood

please explain what the ratio, No credit Interval is actually showing?
It shows how long a company could finance the operating expenses (assuming no change in the level of activity and no further sales).
The current assets less inventory can be assumed to become cash quickly and current assets can be assumed as being paid soon. The difference (often a surplus) should soon be cash available to the business. When you compare this to average cash operating expenses per day you find the NCI.

For any reader who has not used this formula before:
.....Current Assets (less inventory) – Current Liabilities................ = No Credit Interval (NCI)
(Sales – Profit before tax – Depreciation and Amortisation)/365