Definition
Interest expense is the cost of debt over a period (meaning cash interest plus any amortized fees).
Formula
Interest expense = average debt balance * interest rate
Example
Average debt $1M at 8% implies $80k annual interest expense.
How to use it
- Separate cash interest from non-cash amortization for runway planning.
- Model variable-rate debt with rate scenarios, not a single point.
Common mistakes
- Using ending balance instead of average balance for the period.
- Ignoring refinancing risk when interest rates are rising.
Why this matters
This term matters because cash timing and risk are usually the difference between a plan that works on paper and a plan that survives. Use consistent definitions so decisions are comparable over time.
Practical checklist
- Write a 1-line definition for "Interest Expense" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Use a calculator that references this term (e.g., Loan Payment Calculator) to sanity-check assumptions.
- Read the related guide (e.g., Interest expense: definition, formula, and how to calculate) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- Loan Payment Calculator: Compute monthly payment, total interest, and total paid for a loan using amortization.
Guides
- Interest expense: definition, formula, and how to calculate: Interest expense explained: what it is, the formula, how to calculate it, and how net interest expense works.