Interest Expense

Interest Expense is the payments that have come due on amounts borrowed by the company.  Interest expense is the result of a company issuing securities such as bonds, and other debt instruments, which provide the holder with a predetermined payment schedule.

A simple calculation for interest expense is as follows:

Interest Expense = Return on Debt x Debt Outstanding

Interest expense is an important tax shelter, or shield, for any company.  This is because companies are allowed to deduct this expense from their federal income tax liability.