Interest expense represents the cost of borrowing funds, whether it's through loans, bonds, or other financial instruments.
Accurately calculating this figure not only provides insight into a company's financial health but also aids in making informed decisions regarding debt management and financial planning.
In this guide, we'll delve into the intricacies of calculating interest expense on an income statement.
Before delving into the calculation process, it's essential to grasp the concept of interest expense.
Interest expense refers to the interest accrued on outstanding debt during a specific period.
This expense is typically reported on the income statement and reflects the cost of borrowing money to finance operations or investments.
Interest Expense=Principal×Interest Rate×Time Period