Accounting / July 27, 2018 / Sharon Hardin
Interest Expense This item reflects the costs of a company's borrowings. Sometimes companies record a net figure here for interest expense and interest income from invested funds.
For example, assume ABC Corp has a return on investment of $1,000,000, an interest expense of $2,000,000 and average earning assets of $10,000,000. ABC Corp's net interest margin would then be -10%. This reflects the fact that ABC Corp has lost more money due to interest expenses than it's earned from investments. In this case, ABC Corp would have fared better had it used the investment funds to pay off debts rather than to make this investment.
The act of using investor funds in exchange for a piece or "share" of your business is another way to raise capital. These funds can come from friends, family, angel investors, or venture capitalists.
The use of "standard" leases is just a negotiating tactic, and not one that usually favors the tenant. The cost of renting property for your business will be one of the largest business expenses you make, so take the time to really understand the impact of the terms and negotiate hard. Ultimately, the landlord's lease should be seen as an invitation to negotiate.
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