DEFINITION of 'Time Charter Equivalent - TCE'
A shipping industry standard used to calculate the average daily revenue performance of a vessel. Time charter equivalent is calculated by taking voyage revenues, subtracting voyage expense and then dividing the entire total by the round-trip voyage duration in days. It gives shipping companies a tool to measure period-to-period changes.
BREAKING DOWN 'Time Charter Equivalent - TCE'
The time charter equivalent is calculated as:
Voyage Revenues - Voyage Expenses
Round Trip Duration in Days
It can also be calculated on a per-day basis based on period, spot and weighted average.
TCE revenue is used as a measure of performance to track period-to-period changes, but is a non-GAAP measure. This means that regardless of how positive or negative the TCE revenue is, it can not be accepted as an account principle; however, companies may still choose to report it in the financial statements as a footnote.