Non-operating income is any profit or loss generated by activities outside of the core operating activities of a business. The concept is used by outside analysts, who strip away the effects of these items in order to determine the profitability (if any) of a company's core operations.
The following are all examples of non-operating income:
- Dividend income
- Asset impairment losses
- Gains and losses on investments
- Gains and losses on foreign exchange transactions
Non-operating income is more likely to be a one-time event, such as a loss on asset impairment. However, some types of income, such as dividend income, are of a recurring nature, and yet are still considered to be part of non-operating income.
A business might attempt to use non-operating income to mask poor operational results. For example, the recipient of a round of funding could invest the cash and generate such a large amount of interest income that it is the largest part of total earnings reported.
When a company experiences a sudden spike or decline in its non-operating income, this is likely to have been caused by non-operating income, since core earnings tend to be relatively stable over time.
Non-operating income is itemized at the bottom of the income statement, after the operating profit line item.