Non-operating expenses sit below the operating income line on the income statement. They are the costs of running the business in a financial and legal sense, but not the costs of running it as a business. The distinction matters because it lets investors and operators compare operating performance across companies with different capital structures and tax situations.
The main non-operating expense categories
- Interest expense. The cost of debt — bank loans, lines of credit, bonds. Depends on capital structure, not business performance.
- Income taxes. Federal, state, and international corporate taxes. Driven by jurisdiction and tax planning, not operations.
- Foreign exchange losses. When a business operates in multiple currencies and the exchange rate moves against you.
- Losses on asset sales. When you sell equipment, real estate, or business units at a loss to book value.
- Restructuring charges. One-time costs from layoffs, office closures, or business reorganizations.
- Impairment charges. Write-downs of goodwill or other intangibles. Almost always one-time and non-recurring.
Why the separation matters
If you compare two subscription businesses with identical operating performance but one is debt-financed and the other equity-financed, their bottom lines will look very different — entirely because of interest expense. Pulling that into a separate line lets you see that they are equally good at running a subscription business, then have a separate conversation about whether the capital structure of either makes sense.
EBITDA and the operating cutoff
EBITDA — earnings before interest, taxes, depreciation, and amortization — is a standard way to look at a business excluding non-operating items. It is the standard valuation metric for subscription businesses precisely because it strips out capital-structure noise. But EBITDA also strips out depreciation, which understates the real cost of running an asset-heavy business. Use EBITDA as a starting point, not the final number.
For Shopify subscription merchants
Most early subscription stores have minimal non-operating expenses — limited debt, simple tax structure, single currency. The category grows as the business matures: raising debt to fund inventory, expanding into international markets, acquiring smaller brands. Until that complexity arrives, focus on operating expenses and gross margin.
See operating expenses for the operations side and operating and non-operating expenses for the full comparison.