What is interest expense?

Interest expense is the cost of borrowing money. It is a type of non-operating expense that is reported on the income statement. Both individuals and businesses can incur interest expenses when borrowing. It’s how lenders make money from letting others borrow a portion of their funds.

How does interest expense affect a business?

Interest expense is the cost of borrowing money and impacts a company’s profitability by reducing net income. Businesses can reduce interest costs by consolidating debt, refinancing, or making early repayments to lower total interest paid.

Is interest expense a tax deductible expense?

Interest expense is the cost of borrowed funds. It is reported on the income statement as a non-operating expense, and is derived from such lending arrangements as lines of credit, loans, and bonds. Interest expense is usually a tax-deductible expense, which makes debt a lower-cost form of funding than equity.