## Effective Cash Discount Rate Solution

STEP 0: Pre-Calculation Summary
Formula Used
Effective Cash Discount Rate = (Cash Discount Rate*360)/(Term for Payment-Cash Discount Period)
ECDR = (CDR*360)/(TP-CDP)
This formula uses 4 Variables
Variables Used
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.
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.
Term for Payment - Term for Payment describes a payment condition or agreement, particularly in business transactions.
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.
STEP 1: Convert Input(s) to Base Unit
Cash Discount Rate: 6.5 --> No Conversion Required
Term for Payment: 350 --> No Conversion Required
Cash Discount Period: 7 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
ECDR = (CDR*360)/(TP-CDP) --> (6.5*360)/(350-7)
Evaluating ... ...
ECDR = 6.82215743440233
STEP 3: Convert Result to Output's Unit
6.82215743440233 --> No Conversion Required
6.82215743440233 6.822157 <-- Effective Cash Discount Rate
(Calculation completed in 00.004 seconds)
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## Credits

Created by Aashna
IGNOU (IGNOU), India
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BMS College of Engineering (BMSCE), Bangalore
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## < 16 Banking Calculators

Annual Interest Rate with Discount
Annual Interest Rate with Discount = (Cash Discount Amount*360)/((Invoice Amount-Cash Discount Amount)*(Term for Payment-Cash Discount Period))
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Optimal Ordering Frequency = sqrt((Material Requirements*Acquisition Price*Stock Keeping Expense Ratio)/(2*Cost Per Order))
Optimal Lot Size
Optimal Lot Size = sqrt((2*Sales Volume*Cost Per Run)/(Stock Expense Ratio+Interest Expense Ratio))
Calculative Interest
Calculative Interest = (Nominal Value*Price)/(Number of Shares+Payment Per Share)
Conversion Parity
Conversion Parity = (Nominal Value*Price)/(Number of Shares+Payment Per Share)
Liquidity
Liquidity = (Liquid Assets+Accounts Receivable+Stock)/Short Term Payables
Agio
Agio = (Purchase Price)+Option Warrant Price/Exchange Ratio-Share Price
Effective Cash Discount Rate
Effective Cash Discount Rate = (Cash Discount Rate*360)/(Term for Payment-Cash Discount Period)
Cash Value
Cash Value = Amount or Long Lease*(Annual Interest Rate)/(100+1)/(Annual Interest Rate/100)
Interest Earnings Per Quarter
Interest Earning Per Quarter = (Assets)/(Credit Balance)*(Key Interest Rate-2)/400
Outperformance Point
Outperformance Point = (Share Price)*(Expected Return Until Expiration+1)-Dividend
Commercial Interest
Commercial Interest = (Deposits*Annual Interest Rate*Period in Days)/(100*360)
Capitalised Earning Value of Property
Capitalised Earning Value of a Property = (Net Rental Return Per Annum*100)/Rate of Capitalisation
Calculative Deduction
Calculative Deduction = (Replacement Cost-Declining Value)/Period
Annual Rent of Annuity
Annual Rent of Annuity = (Seed Capital-Finish Capital)/Period
Interest Charges Per Quarter
Interest Charges Per Quarter = (Credit)*(Key Interest Rate+1)/400

## Effective Cash Discount Rate Formula

Effective Cash Discount Rate = (Cash Discount Rate*360)/(Term for Payment-Cash Discount Period)
ECDR = (CDR*360)/(TP-CDP)

## What do you mean by Effective Cash Discount Rate ?

Effective Cash discount Rate is an incentive provided by suppliers to encourage customers to pay invoices earlier than the agreed-upon payment terms. For example, a supplier might offer a 2% discount if the customer pays within 10 days instead of the usual 30-day payment period. The Effective Cash Discount Rate allows a company to assess the benefit of paying early to capture the discount compared to other investment opportunities or financing options. It's a measure of the return on investment (ROI) achieved by utilizing available cash to take advantage of discounts. Calculating the Effective Cash Discount Rate involves considering the discount offered, the time value of money, and the frequency of the discount period. By determining this rate, a company can make informed decisions about whether it's financially advantageous to pay early and take advantage of the discount.

## How to Calculate Effective Cash Discount Rate?

Effective Cash Discount Rate calculator uses Effective Cash Discount Rate = (Cash Discount Rate*360)/(Term for Payment-Cash Discount Period) to calculate 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 calculate Effective Cash Discount Rate using this online calculator? To use this online calculator for Effective Cash Discount Rate, enter Cash Discount Rate (CDR), Term for Payment (TP) & Cash Discount Period (CDP) and hit the calculate button. Here is how the Effective Cash Discount Rate calculation can be explained with given input values -> 6.822157 = (6.5*360)/(350-7).

### FAQ

What is 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 and is represented as ECDR = (CDR*360)/(TP-CDP) or Effective Cash Discount Rate = (Cash Discount Rate*360)/(Term for Payment-Cash Discount Period). Cash Discount Rate is the interest rate used to calculate the present value of future cash flows in discounted cash flow analysis, Term for Payment describes a payment condition or agreement, particularly in business transactions & 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.
How to calculate 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 is calculated using Effective Cash Discount Rate = (Cash Discount Rate*360)/(Term for Payment-Cash Discount Period). To calculate Effective Cash Discount Rate, you need Cash Discount Rate (CDR), Term for Payment (TP) & Cash Discount Period (CDP). With our tool, you need to enter the respective value for Cash Discount Rate, Term for Payment & Cash Discount Period and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
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