What does increased interest expense indicate for a business?

Increased interest expense directly signifies that a business is facing higher borrowing costs. This typically occurs when a company has taken on additional debt or experienced an increase in interest rates on its existing debt. As the cost of borrowing rises, the financial burden on the business also escalates, which can impact overall profitability.

Higher interest expenses can signal to investors and stakeholders that the company is either expanding its operations through debt financing or struggling financially, depending on the context of the borrowing. This situation could affect the business's ability to invest in future growth opportunities or to distribute profits as dividends, leading to a reevaluation of its financial health.

In contrast, improved sales figures, higher dividends, and lower asset utilization do not directly correlate with increased interest expenses. These aspects reflect different angles of a business’s performance and financial management. Therefore, understanding that increased interest expense denotes higher borrowing costs is crucial in assessing a company's financial situation.