DPO and Floating rate: Difference between pages

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imported>Doug Williamson
(Mend links.)
 
imported>Doug Williamson
(Expand for fixed debt and floating debt.)
 
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1.
Any method of paying interest that is periodically refixed in line with the current market rate.


Days Payables Outstanding.
Floating rate interest is not fixed for the life of the issue, but is periodically reset according to a predetermined formula.


A working capital management ratio calculated by dividing accounts payable outstanding at the end of a time period by the average daily credit purchases for the period.
Floating rate debt, for example, carries an interest rate which will vary as market interest rates vary.


For example: a company has an average of £50,000 of payables over a year in which the cost of goods sold was £400,000.


The DPO is:
There is a time lag between the setting of the rate for each tranche of interest at the ''start'' of the interest calculation period, and its payment at the ''end'' of the interest period.
 
50,000 / 400,000 * 365 = 45.6 days
 
 
A higher number is generally perceived as better, but a business needs to maintain the goodwill of its suppliers and a shorter payment terms may therefore be necessary.
 
 
Also known as creditor days.
 
 
2.
 
Data Protection Officer.




== See also ==
== See also ==
* [[Accounts payable management]]
* [[Basis swap]]
* [[Creditors]]
* [[Drop-lock bond]]
* [[Days inventory outstanding]]
* [[Exposure period]]
* [[Days sales outstanding]]
* [[Fixed debt]]
* [[General Data Protection Regulation]]  
* [[Fixed rate]]
* [[Payables management]]
* [[Floating debt]]
 
* [[Floating exchange rate system]]
[[Category:Context_of_treasury]]
* [[Floating rate payer]]
[[Category:Corporate_financial_management]]
[[Category:Cash_management]]
[[Category:Technology]]

Revision as of 15:58, 5 March 2018

Any method of paying interest that is periodically refixed in line with the current market rate.

Floating rate interest is not fixed for the life of the issue, but is periodically reset according to a predetermined formula.

Floating rate debt, for example, carries an interest rate which will vary as market interest rates vary.


There is a time lag between the setting of the rate for each tranche of interest at the start of the interest calculation period, and its payment at the end of the interest period.


See also

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