INTEREST EXPENSE CALCULATION

rahul.gupta.npti
Posts: 1
Joined: Tue Jan 22, 2013 4:22 pm

INTEREST EXPENSE CALCULATION

Postby rahul.gupta.npti » Tue Jan 22, 2013 4:43 pm

In the case study related to fmcg sector by pristine of "RCPL" (day II- IV ,VALUATION) ,we have calculated the interest expense in the debt schedule sheet by first calculating the average loan outstanding . Can there be any other way of calculating the interest expense and also why do we have to do it in this way ? pl. explain

pankaj
Finance Junkie
Posts: 61
Joined: Fri Aug 03, 2012 11:24 am

INTEREST EXPENSE CALCULATION

Postby pankaj » Fri Feb 01, 2013 2:02 pm

See, if you are supplied with loan information every time a company takes it (that is you know the timing of the loan transaction)....you can build separete loan schedule for each loan and thus, calculate the interest expense for each loan amount. However, in practical its become difficult for an analyst to get detail information about loan transaction a company makes during the financial year...so, he/she takes the average of the current and last year loan amount in calculating interest expense because the timing of the loan transaction is not known.


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