What is Foolsaurus?

It's a glossary of investing terms edited and maintained by our analysts, writers and YOU, our Foolish community. Get Started Now!


Cost of debt

The cost of debt for a firm is the rate of return required by a company's debt holders.

Contents

Expanded Definition

The cost of debt is simply the current yield on a company's debt. For any given piece of outstanding debt: <math>Cost\ of\ Debt=Annual\ Interest\ Payment / Market\ Value\ of\ Debt</math>

Alternatively, it can be calculated by taking the interest expense from the income statement and dividing it by the market value of all outstanding debt.

Related Fool Articles

Related Community Blogs

Related Terms


Recent Mentions on Fool.com

Advertisement