Operating expenses are those that are incurred in the day-to-day operations of a business, such as wages, rent, utilities, and supplies.
These expenses are directly tied to the production and sale of goods or services and are essential for a business to run.
In contrast, interest expense is not directly related to the production of goods or services, but rather the financing of a business’s operations.
It is important to properly classify interest expense as a non-operating expense because it can have a significant impact on a company’s financial statements.
Non-operating expenses, including interest expenses, are listed after operating expenses on a company’s income statement.
These expenses can reduce a company’s net income, which affects the bottom line of the financial statement.
However, it is important to note that interest expense is tax-deductible, which can help reduce a company’s taxable income.
It is also worth noting that interest expense can vary greatly depending on a company’s capital structure and borrowing costs.