Although interest expense reduces net profit, earnings per share is often higher under debt financing because no additional shares have been issued.

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Quizplus · Accepted Answer

Interest expense does indeed reduce net profit, but because debt financing does not involve issuing new shares, the number of shares outstanding remains the same. This means earnings are spread over the same number of shares, potentially resulting in higher earnings per share (EPS) compared to equity financing, where new shares would dilute EPS.

Although Interest Expense Reduces Net Profit, Earnings Per Share Is