How do interest payments and principal repayment affect the financial statements of a company?

• A. Interest payments decrease liabilities and equity; principal repayment decreases assets and equity.
• B. Interest payments increase assets and liabilities; principal repayment increases equity.
• C. Interest payments decrease assets and equity; principal repayment decreases assets and liabilities.
• D. Interest payments increase equity; principal repayment increases assets.

Answer: (C)