Series 79 practice questionmediumInterest Expense Impact
If a company increases its debt and incurs higher interest expense, what is the most immediate effect on its income statement?
- AIncrease in net income
- BDecrease in net income✓ Correct answer
- CDecrease in revenue
- DIncrease in operating income
Explanation
Why B — Decrease in net income
Higher interest expense directly reduces net income by increasing total expenses. Revenue and operating income are not directly affected by interest expense.
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