How does interest expense affect net income in an income statement?



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Hello,
As i was going through the moodule of analyzing dominos income statement,i was not clear why the interest expense is categorised under the % of operating income.
According to my knowledge the interest expense is paid depending on the revenue(which has been borrowed).so i think that whether the operating income is high or low the interest expense is to be under the revenue generated.
Thank you

2 Answer(s)


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Hi,

I am not sure what you mean by revenue has been borrowed. Revenue is money the company makes by selling its products. It is not borrowed from anyone.

Revenue - Operating Expenses = Operating Income. Interest is paid from money that is left over in the operating income hence it is represented as a % of operating income. Since interest is a non-operating expenses it is not include in operational expenses.

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oh yes sir.i was mistaken.Thank you so much

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