The answer lies in the fact that interest expense is directly related to a company’s ongoing operations.
It is not a one-time cost, but a recurring expense that is necessary to keep the business running.
Just like other operating expenses, interest expense is an ongoing cost that is required to maintain a company’s daily operations.
Furthermore, interest expense is typically associated with long-term debt, such as loans and bonds, which are used to finance a company’s assets and operations.
These assets generate revenue for the company over time, and the interest expense associated with the debt is deducted from the revenue generated by these assets.
This deduction is reflected in the company’s income statement as an operating expense.
The classification of interest expense as an operating expense is important because it provides investors with a clear picture of a company’s ongoing costs and financial performance.
Operating expenses are a key component of a company’s income statement, which provides a breakdown of revenues and expenses over a given period.