English Deutsch Français Italiano Español Português 繁體中文 Bahasa Indonesia Tiếng Việt ภาษาไทย
All categories

Why is interest considered a non-cash expense?

2006-06-28 08:14:13 · 1 answers · asked by Anonymous in Business & Finance Credit

1 answers

Interest is most certainly a cash expense. The reason you add interest expense back is to compare apples to apples. The simplified cash flow calculation is Net Income plus Interest Expense plus Depreciation Expense (there also might be some other oddball add-backs which I will ignore). Now you can compare cash flow to principal and interest payments.

If you didn't add back interest, you would be double counting.

Hope this helps.

2006-06-28 08:25:32 · answer #1 · answered by Adoptive Father 6 · 0 1

fedest.com, questions and answers