Which of the Following Describes the Reporting of Interest Expense

question 99

Multiple Choice

Which of the following describes the reporting of interest expense on the income statement?

• A)It is reported as an operating expense.
• B)It is a component of operating income.
• C)It is deducted from operating income.
• D)It is added to operating income.

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Definitions:

DuPont Model

A financial analysis framework that breaks down return on equity into three components: profit margin, asset turnover, and financial leverage.

Debt-To-Equity

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company’s assets, illustrating financial leverage.

Component Percentages

A financial analysis tool that breaks down each component of a financial statement as a percentage of a total.

Net Sales

The top line reported on the income statement. Net sales = Sales revenue − (Credit card discounts + Sales discounts + Sales returns and allowances).