What are net interest income?
Pure interest income (NIR) is a measure used by businesses to show how much money is obtained or lost in interest payments, and two factors are required to calculate this calculation. These are interest rates of paid assets, which is the money that businesses receive from customers and assets and what companies pay for obligations or money that pay customers and other entities. Businesses usually try to positive nir, because it shows that they make more money for the assets they pay. While banks commonly use this calculation because they tend to pay more than other businesses and focus primarily on interest rates, other companies can also use it. This describes all the money that the company receives from interest payments such as those provided on loans or credit cards. For example, if a company receives $ 20 (USD) from a loan and $ 35 from a credit card, then its monthly interest is paid by assets $ 55.
The second factor needed for calculating net interest income is the interest that the company pays for obligations. The bank pays interest rates to customers for storing money and this data must be added. For the calculation of the NIR, the positive interest is deducted from a negative interest. For example, if the positive interest is the above of $ 55 and the company is $ 40, then the company has NIR $ 15.
Most businesses seek to achieve a positive income from net interest because they show that they are getting more money based on interest -based payments than they lose. Negative NIR can be a bad sign, especially if it is a large number, because it means that businesses pay a lot of money and can recover from the loss. In order to improve NIR, businesses can reduce the programs through which they pay customers, can reduce interest payments paid, or can get more positive assets.
This formula can be used almost any company that receives and pays money for assets andInterest -based obligations, but banks most often use it. Banks lose and raise money primarily from interest rates in their daily negotiations, so it is a natural way to find out whether they receive or lose funds. Other businesses are used by factors, such as how much they have to pay to investors and how much they get from investment in other companies or projects.