Regarding the above formula, yup, that's correct, providing that you never pay your bill a single day ahead of the due date. If you do, you will be paying less in interest that the amount calculated via the formula. Thanks Yakk for looking that up & typing it out
Some other common formulas that are used in the realm of lending.
Debt-to-Income Ratio
Minimum Monthly Payments/Income = DTI
Generally, the debts used for calculating this are debts that report to your credit bureau (ie Vehicle loans, Credit Cards, School loans) as well as Homeowners Insurance and Property Taxes.
It is best to try and keep this number below 50%, even better if you can keep it below 35%.
Loan-to-Value Ratio
Values of all Liens on Collateral Item/Value of Item= LTV
Generally, when speaking of LTVs, mortgages on a home are involved, although you could certainly use the term when speaking about vehicle or other collateralized loans. The lower the LTV, the more equity that you have in that specific collateral. Especially when it comes to mortgages, the lower the LTV, the better potential financing you may qualify for. A Low LTV is especially important when purchasing/refinancing non-owner occupied property, as it is usually more difficult to obtain financing for those types of properties.