What does it mean when a company's "Interest Income" decreased by 35% from the previous year...

What does it mean when a company's "Interest Income" decreased by 35% from the previous year and "Note Payable" Increases to $12million from 0? What is the relationship?

and also how does this change impact risks of material misstatement in financial statements?

Expert Solution

When the company's interest income has decreased that means that the funds available with the company have been utilized for buying an asset or paying off an existing liability or withdrawal of capital.

There is also an increase in note payables from nil to 12 million which implies that the Company has bought a long term asset which has been paid with available funds in the company and also a liability has been created for the balance value of assets. The relationship between decrease in interest and increase in notes payable is linked with the availability of funds with the company. The value of available funds of the company has reduced as compared to previous year.

The reasons for such a change in the company as compared to the previous year could also be due to mis-statement of financial statements due to mis-appropriate of assets in the company. The company may identified such mis-statement of financial statements and recognized the impact of the same in the current year.

There may also be a possiblity that there is no mis-statement in the financial statement and the transactions which led to change in interest income and note payable were due to genuine business transaction during the year.

ekkarill92 answered 2 years ago

what does it mean when the offspring decreased?

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