Setting the Interest of Debt Schedules

You manage interest on the debt on Interest.

  To set debt schedule interest:

  1. Access Debt Scheduler.

    See Defining Debt Schedules.

  2. Select Interest.

  3. In Day of the Month for Interest Payments, select a day of the month to make interest payments:

    • Issue Day

      The interest payment day is the same as the debt was issued. For example, quarterly interest payments on a debt issued on June 8 are paid on September 8, December 8, March 8, and June 8.

    • Last Day of the Month

      All interest payments occur on the last day of the month.

    • Specified Day of the Month

      If a contract specifies a date within each month for interest payments, but the issue date of the loan is not that same day, select this option. For example, if a loan is issued on April 7, but interest payments should occur on the 15th of each month, use this option to specify the 15th.

      With Specified Day of the Month, enter the day of each month for interest payments in Payment Day .

  4. Under Cash Interest, define how cash interest is handled:

    • In Frequency of Interest Payment, select the frequency of interest payments.

      Debt Scheduler calculates interest expense on a daily basis, but you define when interest payments occur. Each option has a different effect on overall cash flow:

      • Annual, Monthly, Quarterly, Semi-Annual

        Calculate interest at the selected interval.

      • Daily

        If interest payments occur on any day except the last of the month, interest accrues at the end of every reporting period. With Daily, interest is paid as it is incurred, so the cash flow of the interest matches the expense, and no interest accrues.

      • Balloon

        Use Balloon to calculate zero interest payments through the life of the debt, but pay all interest in one lump sum at the end of the schedule.

      • Never

        Calculates no interest.

    • Select Interest Rate Input Is to define variable or constant interest rates for each period. Applies only to simple interest—does not include compounding.

      • Variable in each period

        Enter interest rates on Accounts.

      • Constant for all periods

        Use the same rate throughout the loan term.

        With Constant for all periods, enter a value in Interest Rate to define the constant interest rate.

    • Optional: Select Spread over another account for loans affected by macroeconomic variable.

      Default = off

      Some loans interest rates depend on macroeconomic variables. With Spread over another account, Debt Scheduler calculate interest by combining the rate in Interest Rate Input Is combined with output values from an account you select in Spread Account as the macroeconomic variable.

    • Optional: Select Use Grid Pricing to define rules changing interest rates according to criteria over time.

      Default = off

      Use grid pricing to define rules changing the interest rate according to company performance in time periods.

      Enter a date when the grid pricing rule takes effect in Date to start repricing, and click Edit Grid Pricing to create rules.

      see Using Grid Pricing.

  5. Optional: Under PIK Interest, define paid-in-kind (PIK) interest:

    • In Added to Principal, define how often interest is added back into principal:

      • Never

        Calculate no interest.

      • Daily

        Calculates interest daily.

      • Monthly

        Calculates interest monthly.

      • Quarterly

        Calculates interest quarterly.

      • Semi-Annually

        Calculates interest semi-annually.

      • Annually

        Calculates interest annually.

    • PIK Interest Rate displays the rate of paid-in-kind interest. The PIK interest rate account (v16xx.65) must be forecast as constant in all periods. Varying PIK interest rates can not be forecast here.

      Paid-in-kind interest is non-cash interest, so it is added back to the principal. You define how often to add interest back into the principal. As interest is calculated on a daily basis, subsequent interest calculations are increased depending on how often interest is added back into the principal.