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Effective Cash Discount Rate Formula

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Effective Cash Discount Rate represents the actual rate of return or cost of financing associated with the advantage of a cash discount offered by a supplier for early payment of an invoice. Check FAQs

ECDR = \frac{CDR \cdot 360}{TP - CDP}

ECDR - Effective Cash Discount Rate?CDR - Cash Discount Rate?TP - Term for Payment?CDP - Cash Discount Period?

Effective Cash Discount Rate Example

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Here is how the Effective Cash Discount Rate equation looks like with Values.

Here is how the Effective Cash Discount Rate equation looks like with Units.

Here is how the Effective Cash Discount Rate equation looks like.

6.8222 = \frac{6.5 \cdot 360}{350 - 7}

6.8222 = \frac{6.5 \cdot 360}{350 - 7}

6.8222 = \frac{6.5 \cdot 360}{350 - 7}

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Effective Cash Discount Rate Solution

Follow our step by step solution on how to calculate Effective Cash Discount Rate?

FIRST Step Consider the formula

ECDR = \frac{CDR \cdot 360}{TP - CDP}

Next Step Substitute values of Variables

∴

ECDR = \frac{6.5 \cdot 360}{350 - 7}

Next Step Prepare to Evaluate

∴

ECDR = \frac{6.5 \cdot 360}{350 - 7}

Next Step Evaluate

∴

ECDR = 6.82215743440233

LAST Step Rounding Answer

∴

ECDR = 6.8222

Effective Cash Discount Rate Formula Elements

Variables

Effective Cash Discount Rate

Effective Cash Discount Rate represents the actual rate of return or cost of financing associated with the advantage of a cash discount offered by a supplier for early payment of an invoice.

Symbol: ECDR

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Effective Cash Discount Rate

Cash Discount Rate

Cash Discount Rate is the interest rate used to calculate the present value of future cash flows in discounted cash flow analysis.

Symbol: CDR

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Cash Discount Rate

Term for Payment

Term for Payment describes a payment condition or agreement, particularly in business transactions.

Symbol: TP

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Term for Payment

Cash Discount Period

Cash Discount Period is the time during which a buyer can take advantage of a cash discount offered by a seller for early payment of an invoice.

Symbol: CDP

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Cash Discount Period

Other formulas in Banking category

Go Interest Charges Per Quarter

ICQ = (Cr) \cdot \frac{KIR + 1}{400}

Go Interest Earnings Per Quarter

IEQ = \frac{A}{CB} \cdot \frac{KIR - 2}{400}

Go Commercial Interest

CInt = \frac{D s \cdot AIR \cdot PD}{100 \cdot 360}

Go Annual Interest Rate with Discount

AIRD = \frac{CDA \cdot 360}{(IA - CDA) \cdot (TP - CDP)}

How to Evaluate Effective Cash Discount Rate?

Effective Cash Discount Rate evaluator uses Effective Cash Discount Rate = (Cash Discount Rate*360)/(Term for Payment-Cash Discount Period) to evaluate the Effective Cash Discount Rate, Effective Cash Discount Rate refers to the annualized rate of return a company earns on its investments or operations when taking advantage of cash discounts offered by its suppliers. Effective Cash Discount Rate is denoted by ECDR symbol.

How to evaluate Effective Cash Discount Rate using this online evaluator? To use this online evaluator for Effective Cash Discount Rate, enter Cash Discount Rate (CDR), Term for Payment (TP) & Cash Discount Period (CDP) and hit the calculate button.

FAQs on Effective Cash Discount Rate

What is the formula to find Effective Cash Discount Rate?

The formula of Effective Cash Discount Rate is expressed as Effective Cash Discount Rate = (Cash Discount Rate*360)/(Term for Payment-Cash Discount Period). Here is an example- 6.822157 = (6.5*360)/(350-7).

How to calculate Effective Cash Discount Rate?

With Cash Discount Rate (CDR), Term for Payment (TP) & Cash Discount Period (CDP) we can find Effective Cash Discount Rate using the formula - Effective Cash Discount Rate = (Cash Discount Rate*360)/(Term for Payment-Cash Discount Period).

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Effective Cash Discount Rate Formula

Effective Cash Discount Rate Example

Effective Cash Discount Rate Solution

Effective Cash Discount Rate Formula Elements

Other formulas in Banking category

How to Evaluate Effective Cash Discount Rate?

FAQs on Effective Cash Discount Rate

Variable Name