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A little bit of help with ratios please.

HaysahHaysah Feels At HomeRegistered Posts: 80
: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

Comments

  • HaysahHaysah Feels At Home Registered Posts: 80
    what it represents.
  • SandyHoodSandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    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
    Sandy
    [email protected]
    www.sandyhood.com
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