hello. telecom co. has borrowed a money. It'll appear under the head 'loan' in its books of A/C. money borrowed is not an expense, it's a liability. Gross margin / operating income won't change due to the money borrowed. Because loan amount won't appear in calculating the 'total COST'. E.g. if you sell 100 quantities priced @ Rs.10, your total revenue would be Rs.1000. (NOTE: REVENUE, not INCOME). After deducting all direct expenses & operating expenses, assume your operating income be Rs.600. if you've to pay interest of Rs. 50 on the amount you borrowed, your net income will be Rs. 550. Even if you had not borrowed money, your revenue would have been same i.e. Rs. 600.
Feb 26 2013 02:09 PM