What is considered a non-operating expense?

A non-operating expense refers to costs that are not directly tied to the core operations of a business. Interest expense is classified as a non-operating expense because it is related to the costs of borrowing funds, rather than the direct costs of producing goods or services that the company provides. This distinction is important because it helps to separate operational performance from financing activities in financial statements, providing a clearer picture of how well the company is performing its core business activities.

In contrast, the other options—cost of goods sold, direct materials, and sales salary—are all related to the day-to-day operations of a business. Cost of goods sold encompasses the direct costs attributable to the production of goods sold by a company. Direct materials are the raw materials that are used in the production of those goods, and sales salary is considered an operating expense since it is part of the costs associated with selling and marketing the company's products. By clearly differentiating between operating and non-operating expenses, stakeholders can better assess the operational efficiency and financial health of the business.