The objective of the work was to determine the cost, in percentage, of the commercial credit regularly delivered by the commercial houses in Paraguay. With this purpose, in the course of 2017, an exploratory-level investigation was carried out.
The field work consisted of reviewing the offers of the commercial houses, published in the newspapers with wide circulation and in the magazines printed by these companies. Subsequently, personal telephone communications were made with the sellers of this commercial house, in order to obtain the missing data. Contracting the spot price, with the list price and other data. The BAILY formula was applied in order to facilitate the analysis and presentation of the results.
The average results of the sample are 83% of annual nominal rate and 139% of annual effective rate. Although most of them do not reveal what is the rate at which it calculates the interest and therefore the installments, it is possible to determine it from the cash value against the installments to pay. In order to verify the findings of the investigation, the rates were applied in the French amortization system, whose interest is established on the balance of the debt. Keywords: interest, commercial, nominal, effective
INTRODUCTION
It has been considered that the study, of the proposed topic, would contribute to people eager to understand the dynamics of commercial credit, granted by companies that commercialize products such as household appliances, furniture, sporting goods, among others; especially those that offer acquisition facilities to their clients through commercial credit.
Although the results have as their main audience those who require a commercial credit, the information collected could also serve micro, small and medium-sized companies, who wish to make their sales viable, through commercial credit. For which, they can observe the mechanisms applied by these companies.
Although commercial credit has allowed the commercial possibilities of the companies that apply it to expand, it is also necessary to achieve financial viability, because the granting company must also have enough credit to support the operation. That is, although the credit granted by these commercial houses could be considered high cost (LAST MINUTE, 2015), it must be borne in mind that these in turn will require resources to fund these operations. In other words, the same commercial house will request funds from financial entities, for which it will be able to demonstrate its ability to pay through the flow generated in the future by these credit operations. In this sense, commercial credit is an important element, for these companies,within their sales policies and within them to credit policies.
The objective of the investigation is to determine the cost of credit operations, in percentage, in commercial companies in Greater Asunción - Paraguay. Therefore, the need arises, first of all, to know the conditions under which commercial credit is granted. Second, to know the characteristics of the credit operation of these commercial houses. Finally, establish the cost, in percentage, of the commercial credit operation.
In order to make it possible to achieve the expected results, an exploratory investigation was carried out; This level of research was selected with the lowest requirement, both financial and human talent.
MATERIALS AND METHODS
The research carried out is of an exploratory level, therefore its aim is to reveal the most significant aspects. Depending on the nature of the research, it can be considered qualitative; because, although quantitative data is taken, the sample is not significant. Therefore, the results cannot be generalized, nor can anything be inferred from the total population, without revealing important aspects of it that could be contracted with a more extensive investigation.
It started with a documentary bibliographic review, Bibliographies on the topic were used. In addition to the data of Internet Portals.
For the collection of primary data, the publications of the products offered by these companies were used; in which some relevant data is already found. Subsequently, interviews were conducted, via mobile phone, with the vendors of these commercial houses, in order to collect the missing information. A total of 22 interviews were conducted with the sales managers of these companies, located in Greater Asunción.
Non-probability sampling was chosen for convenience. Although this sampling technique is not convenient in order to generalize the results in descriptive or causal research, it is useful in exploratory research, eminently qualitative.
This type of sampling is useful in exploratory research in order to generate hypotheses about the total population. The hypotheses generated can subsequently be accepted or rejected with more extensive investigations, that is, descriptive or causal investigations.
To make the process viable, the following scheme was applied:
- Selection of field workers. Training of field workers. Supervision of field workers. Validation of field work. Evaluation of field workers.
Due to the workload, it has been decided to form a work team, which was trained and supervised, in order to carry out the interviews appropriately. The interviewers are from the 3rd semester of the Bachelor's Degree in Agricultural Administration, Faculty of Agricultural Sciences of the National University of Asunción. The data, recorded by team members, was corroborated for validation. After validation, the results were established.
RESULTS AND DISCUSSION
The Credit offered by the houses that sell products in installments, mainly household appliances, according to publications is usually quite high (LAST MINUTE, 2015). According to the investigation, the cost of the purchase on credit, in the selected sample, is over 80%, in most cases.
To properly determine the rate, it is necessary to clarify how much the monetary value of the real debt is. On the other hand, it is also required to know the amount and number of fees. To establish the real debt, it is necessary to know, first, if there is a discount for cash payment and if the first installment is paid when withdrawing the asset or after 30 days. In the sample taken, the first installment is paid when the asset is withdrawn, in most cases. In addition, most of the companies surveyed have discounts, on the list price, for cash payments.
Taking into account the previous parameters, the summary of the real debt for each observation is presented in Table 1.
Table 1: Real Debt
| No. | List price | nCa | Share | Discount | Real Debt |
| one | 1,600,000 | one | 180,000 | fifteen% | 1,180,000 |
| two | 3,318,000 | one | 436,000 | 0% | 2,882,000 |
| 3 | 2,566,000 | one | 149,000 | 25% | 1,775,500 |
| 4 | 822,000 | 0 | 93,000 | fifteen% | 698,700 |
| 5 | 1,882,000 | 0 | 188,000 | fifteen% | 1,599,700 |
| 6 | 5,295,000 | one | 468,000 | 10% | 4,297,500 |
| 7 | 4,965,700 | one | 520,000 | fifteen% | 3,700,845 |
| 8 | 1,330,000 | 0 | 182,000 | 10% | 1,197,000 |
| 9 | 1,880,000 | one | 205,000 | 5.85% | 1,565,020 |
| 10 | 1,476,000 | one | 226,000 | 10% | 1,102,400 |
| eleven | 1,601,000 | 0 | 209,000 | 10% | 1,440,900 |
| 12 | 12,938,000 | one | 1,193,000 | 6% | 10,968,720 |
| 13 | 1,632,000 | one | 149,000 | 0% | 1,483,000 |
| 14 | 2,490,000 | one | 268,000 | 0% | 2,222,000 |
| fifteen | 3,114,000 | one | 278,000 | 0% | 2,836,000 |
| 16 | 2,297,000 | one | 282,000 | 0% | 2,015,000 |
| 17 | 750,000 | one | 104,000 | 5% | 608,500 |
| 18 | 2,566,000 | 0 | 149,000 | 25% | 1,924,500 |
| 19 | 2,100,000 | 0 | 209,000 | 10% | 1,890,000 |
| twenty | 3,360,000 | one | 296,000 | fifteen% | 2,560,000 |
| twenty-one | 3,570,000 | one | 297,500 | fifteen% | 2,737,000 |
| 22 | 3,671,000 | one | 253,000 | fifteen% | 2,867,350 |
Source: self made.
* nCa: Advance installment numbers
To illustrate a particular case, the data from items 6 of Table 1 will be taken. You have a company that would sell a refrigerator to a customer, whose list price is G 5,295,000, in 15 equal monthly installments of G 468,000. The first installment is paid to withdraw the asset. In addition, the commercial house offers a 10% discount on the list price, for cash payment.
With these data, the question must be asked: What is the effective interest rate of the operation?
To answer the question, you must first establish the actual amount of the doubt.
In this case, when there is a discount on the list price, the counted price is determined by subtracting the amount of the discount from the list price.
Va = PL - D
PL = 5,295,000
D = 529,500
Va = 4,765,500
The result is G. 4,765,500, in case the purchase is in cash. But, this does not adequately illustrate the real value of the debt, in case the payment is in installments. So, since a fee must be paid, before withdrawing the asset, the debt, at time zero, is G.
4,765,500 less the first installment, of G 468,000.
Vv = Va - c
Va = 4,765,500 c = 468,000
Vv = 4,297,500
"That is to say that the debt at time zero, today after paying the first installment is Gs. 4,297,500. In other words, the amount that was missing to buy the item in cash is Gs. 4,297,500 ”, this is the amount that the commercial house actually finances.
The foregoing does not only have consequences for the amount of the real debt; but also, in the number of payments. The number of installments is reduced by one, since the first installment is paid to withdraw the asset.
n = 15 - 1
n = 14
“That is to say, the real debt of Gs. 4,297,500 will be canceled in fourteen payments of Gs.
468,000 ”
With this, the previous operation is left with the following data:
Vv = 4,297,500 c = 468,000 n = 14 i =?
In order to determine the interest rate of the operation, the BAILY formula is applied:
i = 0.061986561 Monthly effective rate
Since the fees are paid monthly, this value is multiplied by 12, to have the annual nominal rate.
i = 0.743838733 Annual nominal rate. This is the nominal rate of the operation. Now we will apply the formula to calculate the effective interest:
Solution: i` = 1,057918882, that is to say little more than 105.79%
In order to verify the results, the data will be submitted to a fair and equitable method of calculating quotas: the French Amortization System. For this, the nominal rate is applied, in the amortization formula, with the installments of G 468,000, for the 14 installments, we would have
approximately the original debt of G 4,297,500, the amount remaining after the first installment and the discount.
V v = 4,297,039; Difference = 461
The result is practically the same. This is due to the enormous number of decimals that must be handled and the fact that the BAILY formula allows us to arrive at a fairly approximate, not exact, result. Considering that the difference is minimal, it is an adequate method to make decisions related to credits of this type.
Below is Table 2, the debt service, according to the French amortization system (system for calculating interest on balance):
Table 2: Debt service (in guaraníes)
| Weather | Share | Interest | Amortization | Balance |
| - | 4,297,039 | |||
| one | 468,000 | 266,359 | 201,641 | 4,095,398 |
| two | 468,000 | 253,860 | 214,140 | 3,881,257 |
| 3 | 468,000 | 240,586 | 227,414 | 3,653,843 |
| 4 | 468,000 | 226,489 | 241,511 | 3,412,332 |
| 5 | 468,000 | 211,519 | 256,481 | 3,155,851 |
| 6 | 468,000 | 195,620 | 272,380 | 2,883,471 |
| 7 | 468,000 | 178,736 | 289,264 | 2,594,208 |
| 8 | 468,000 | 160,806 | 307,194 | 2,287,014 |
| 9 | 468,000 | 141,764 | 326,236 | 1,960,778 |
| 10 | 468,000 | 121,542 | 346,458 | 1,614,320 |
| eleven | 468,000 | 100,066 | 367,934 | 1,246,386 |
| 12 | 468,000 | 77,259 | 390,741 | 855,645 |
| 13 | 468,000 | 53,038 | 414,962 | 440,684 |
| 14 | 468,000 | 27,316 | 440,684 | 0 |
Source: self made.
By applying this technique, each of the observations could determine the nominal and effective annual rate. Next, in Table 3, the summary of results for each observation is presented.
Table 3: Monthly rate, annual nominal rate and effective annual rate
| No. | Share | nCv | Real Debt | Monthly rate | Annual nominal rate | Effective rate
annual |
| one | 180,000 | eleven | 1,180,000 | 9.81% | 118% | 207% |
| two | 436,000 | 9 | 2,882,000 | 6.66% | 80% | 117% |
| 3 | 149,000 | 17 | 1,775,500 | 4.27% | 51% | 65% |
| 4 | 93,000 | 12 | 698,700 | 8.06% | 97% | 154% |
| 5 | 188,000 | 16 | 1,599,700 | 8.63% | 104% | 170% |
| 6 | 468,000 | 14 | 4,297,500 | 6.20% | 74% | 106% |
| 7 | 520,000 | eleven | 3,700,845 | 8.07% | 97% | 154% |
| 8 | 182,000 | 12 | 1,197,000 | 10.74% | 129% | 240% |
| 9 | 205,000 | eleven | 1,565,020 | 6.64% | 80% | 116% |
| 10 | 226,000 | eleven | 1,102,400 | 16.83% | 202% | 547% |
| eleven | 209,000 | 12 | 1,440,900 | 9.77% | 117% | 206% |
| 12 | 1,193,000 | eleven | 10,968,720 | 3.11% | 37% | 44% |
| 13 | 149,000 | 14 | 1,483,000 | 4.92% | 59% | 78% |
| 14 | 268,000 | 14 | 2,222,000 | 7.91% | 95% | 149% |
| fifteen | 278,000 | 14 | 2,836,000 | 4.53% | 54% | 70% |
| 16 | 282,000 | eleven | 2,015,000 | 7.98% | 96% | 151% |
| 17 | 104,000 | 9 | 608,500 | 9.61% | 115% | 201% |
| 18 | 149,000 | 18 | 1,924,500 | 3.75% | Four. Five% | 56% |
| 19 | 209,000 | 12 | 1,890,000 | 4.65% | 56% | 72% |
| twenty | 296,000 | eleven | 2,560,000 | 4.24% | 51% | 65% |
| twenty-one | 297,500 | eleven | 2,737,000 | 3.10% | 37% | 44% |
| 22 | 253,000 | 14 | 2,867,350 | 2.95% | 35% | 42% |
The average results of the sample are 83% of annual nominal rate and 139% of annual effective rate.
CONCLUSIONS
The results indicate that the sample average is 83% annual nominal rate and 139% annual effective rate. As it could be seen in the investigation, to properly determine the rates, it is necessary to clarify what the real debt is, the amount and the number of installments. To establish the real debt, it is necessary to know, first, if the first installment is paid when the asset is withdrawn or after 30 days and if there is a discount for cash payment. In most cases, the first installment is paid when the asset is withdrawn. In almost all cases there is a discount, on the list price, for cash payments.
Bibliography
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