Lesson 22 of 25 · 6 min

The same checklist against an invented April

A new month is the same five checks with different inputs, not a different kind of arithmetic.

April is invented so the checklist has a second month. Thirty days at 7.22 percent Act/360 on $1,858,563.47 produce $11,182.36. The close is $1,869,745.83. Last sales are Meridian $147.63, Calder $588.40, Collective $216.17, Oakridge $63.08, government fund $50.87 — awkward moves, not round ones, mixed in sign. The book is $6,015,195.50. Advance rates are held at March.

The same recoveries as lesson 21, on April's inputs:

Interest: $1,858,563.47 × 0.0722 × 30 ÷ 360 = $11,182.36.
Close: $1,858,563.47 + $11,182.36 = $1,869,745.83.
Book: $1,830,612 + $1,824,040 + $897,105.50 + $517,256 + $946,182 = $6,015,195.50.
Lending value: $915,306 + $638,414 + $627,973.85 + $284,490.80 + $804,254.70 = $3,270,439.35.
Blended advance: $3,270,439.35 ÷ $6,015,195.50 = 54.37 percent.
Trigger: $1,869,745.83 ÷ 0.70 = $2,671,065.47. Headroom 55.59 percent. Shortfall $0.00.

March to April is a 0.29 percent book decline and a $11,182.36 balance rise. Headroom moved from 55.99 percent to 55.59 percent. None of the operations changed. The inputs did. That is the whole distinction between reading one statement and reading a sequence of them: the checklist is stable, the rows are not.

A second month is not a second method. It is the first method with a new opening, a new day-count, and five new last sales.

Key terms

Second-month checklist: The March recoveries repeated on April's opening, day-count, last sales and, unless revised, March's advance rates.
Stable operations: Interest, chain, row products, blended advance, trigger, headroom, shortfall. The list does not grow when the calendar does.

Worked example

April against March, same operations

March close becomes April open. 30 days at 7.22 percent. Last sales $147.63, $588.40, $216.17, $63.08, $50.87. Advance rates unchanged.

April interest / close: $11,182.36 / $1,869,745.83
April book / lending value: $6,015,195.50 / $3,270,439.35
April blended advance: 54.37%
April trigger / headroom: $2,671,065.47 / 55.59%
March headroom, for the pair: 55.99%
Shortfall: $0.00

The operations are the March operations. The 0.40-point headroom move is the new inputs, not a new checklist.

Check yourself

April's reconstructed close is $1,869,745.83 and the rebuilt book is $6,015,195.50. What is the trigger, and what is headroom?

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Educational only. Nothing in this lesson is investment, legal or tax advice, or a recommendation to enter into any transaction. Figures are illustrative and computed from the inputs stated in the lesson.