Summary
Finance Costs represent expenses associated with borrowing and financing activities. These commonly include interest paid on loans, bonds, or other debt obligations.
Finance costs show the cost of using borrowed capital.
Why it matters
High finance costs can reduce profitability and increase financial risk. They may indicate that a company has significant debt or is paying higher interest rates.
Investors often review finance costs when assessing leverage and debt sustainability.
How to Calculate it
Finance Costs = Interest Expense + Other Financing Expenses
How to read it
Rising Finance Costs may put pressure on net income, especially if operating profit is not growing. Lower finance costs may improve profitability and financial flexibility.
Finance Costs should be reviewed together with total debt, interest coverage, and cash flow.