What is the Time Charter Equivalent formula?

• A. (Gross trade revenue - directly related trade cost) / employment days.
• B. (Gross trade revenue - directly related trade costs) / employment days.
• C. (Net revenue - related trade costs) / employment days.
• D. (Gross trade revenue - unrelated trade cost) / voyage days.

Answer: (A)

Time Charter Equivalent shows what the voyage would earn as a daily rate if the ship were on a time charter. It does this by taking the voyage revenue and removing only the costs that are directly tied to that voyage, then spreading that net amount over the days the vessel is employed on that charter.

So you start with gross trade revenue, subtract directly related trade costs (the costs that vary with the voyage, such as port charges, pilotage, towage, cargo handling, bunkers used for the voyage, canal tolls, etc.), and divide by the number of employment days. This yields a daily rate that reflects the ship’s earning power during the charter period.

Why this form is best: it isolates the voyage’s variable, voyage-specific earnings from the voyage’s costs and then distributes the result over the actual period the ship is employed, giving a comparable daily rate for Time Charter purposes. Using unrelated costs would distort the figure, and using voyage days instead of employment days would omit time the ship spends in port or waiting, which is part of earning the charter rate. Using net revenue as the numerator can introduce ambiguity about what’s included as revenue versus costs.