Interest expense is the cost of borrowing money, typically in the form of loans or bonds. It represents the amount of money that a company pays in interest on its outstanding debt. This expense is considered a financing cash flow because it is directly related to the company's financing activities, specifically the cost of obtaining and servicing debt. Interest expense is deducted from a company's income to calculate its net income, and is an important factor in determining a company's overall financial health and profitability.