Interest expense represents the cost of borrowing funds, whether through loans, bonds, or other debt instruments.
Accurately calculating interest expense enables businesses to assess their financial obligations and investors to evaluate a company's leverage and financial health.
In this guide, we'll delve into the steps involved in calculating interest expense on an income statement.
Before diving into the calculation, gather the relevant financial information.
Additionally, note any other fees or costs associated with the debt, such as origination fees or discounts.
The interest rate is the annual percentage rate (APR) charged by the lender for the use of the funds.
It may be fixed or variable, depending on the terms of the loan or debt instrument.