Operating and Non-operating Components of Income Statement

In the income statement of a company, a distinction is made between income and expenses from the operating and non-operating activities. 

Operating activities are the primary business activities arising from businesses’ normal operations. Non-operating items include secondary activities that are not a part of a business’s normal operations. For example, for a manufacturing company, any interest or dividend earned on an investment, or gains (losses) from a foreign exchange transaction are considered non-operating income. These are income and expenses related to investing and financing activities. However, for a financial firm such as a bank, any investing and financing transactions are considered to be operating activities.

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