The operating income is derived after the COGS and operating expenses are deducted from the revenue generated by the company. The interest and tax components are paid from the operating income, so arrived. Hence, only when it's operating income is in the positive, the company will be in a position to meet its interest payment obligation. Hence, it is more accurate and meaningful to calculate interest expense as a % of operating income rather than revenue %.
Jan 27 2014 07:39 PM