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1. Why is it recommended to calculate interest on the opening debt balance, if possible?
It is easier for end users to understand
Any average debt balance involves taking a proportion of the debt closing balance. In a sophisticated model, the debt drawdowns and repayments may have to consider the interest charge in the cash requirements. This can cause what might be an unnecessary circular reference and lead to an incorrect / incalculable figure in the model
It is consistent with standard debt term sheets
2. In the main example, how many lines from this Return on Debt control account must be directly referenced in the financial statements to make the Balance Sheet balance?
3. Which of the following three line items in the Return on Debt control account is the key driver?
Closing Interest Payable
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