Date created: Nov 24, 2020 • Last updated: Nov 26, 2020
What is Non-Operating Expenses?
Non-Operating Expenses is the sum of all expenses that are unrelated to core business operations. This includes interest payments, losses due to disposition of assets, reorganizing costs, and charges on obsolete goods or inventory. Non-Operating Expenses is usually non-recurring and does not include day-to-day business costs.Alternate names: Non-Recurring Expenses
How to calculate
If a clothing export company decides to sell a building for $500,000, the expense incurred from the sale of the building is considered a Non-Operating Expense. It is not an operating expense since it does not arise from the core operations of the company.
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More about this metric
Core business operation costs such as administrative costs, salaries, rent, and marketing expenses are generated by the day-to-day activities required to run a business. It is therefore important for these costs to result in profit, in order to justify the expense incurred.
Non-Operating Expenses or non-recurring costs are financial obligations not related to core business operations. These expenses include legal fees, interest payments, loss from selling assets, reorg costs, currency exchange rates, and other one-time or unusual costs.
Generally, Non-Operating Expenses is not taken into the calculation when measuring a company’s profit. Operating profit, or EBITDA, gives revenue after deducting operating expenses. Non-Operating Expenses is usually deducted from EBITDA on an income statement. This ensures that the company has a clear view of the costs associated with running the business, separate from Non-Operating Expenses. It is shown as a bottom-line item on the income statement and is recorded below the results from the continuous operations.