ACCOUNTING TUTORIALS
Part 2: The Basics of Interpreting Financial Statements
Relationship between Interest, Time and Rates
The following interest calculation is assumed when considering the rate of return on investments:
Interest = Principal x Rate x Time
Interest = income or expense resulting from investing or borrowing
Principal = the $ amount invested or taken as a loan
Rate = interest rate (%) per year*
*Unless otherwise stated, rate of return scenarios assume a time period of one year.