Which of the following is not affected by a change in interest expenses?

Question

Quizplus · Accepted Answer

Gross margin and EBIT are not affected by a change in interest expenses. Gross margin is calculated as revenue minus cost of goods sold, regardless of interest expenses. EBIT (earnings before interest and taxes) is also calculated before interest expenses are deducted. A and B are affected by interest expenses because both gross margin and ROE (return on equity) include net income, which is reduced by interest expenses. C is affected by interest expenses because EBIT (earnings before interest and taxes) is reduced by interest expenses to calculate EBT (earnings before taxes).

Which of the Following Is Not Affected by a Change