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 that provide the holder with predetermined payments.

A simple calculation for interest expense is:

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 before calculating federal income tax due the government.