Examples of non-operating in the following topics:
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- Activities of the business include operating activities and non-operating activities such as investing activities, and financing activities.
- In addition to operating activities businesses engage in non-operating activities.
- Non-operating activities are not related to the day-to-day, ongoing operations of a business.
- Non-operating cash flows include borrowings, the issuance or purchase of stock, asset sales, dividend payments, and other investment activity.
- As with operating activities GAAP principles dictate how non-operating items are classified on the statement of cash flows.
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- Operating expenses and non operating expenses are deducted from revenue to yield net income.
- Its counterpart, a capital expenditure, or non operating expense, is the cost of developing or providing non-consumable parts for the product or system.
- Paper, toner, power, and maintenance costs represent operating expenses.
- Non operating expenses include loan payments, depreciation, and income taxes.
- Operating expenses, non operating expenses and net income are three key areas of the income statement.
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- Extra gains or losses are nonrecurring, onetime, unusual, non-operating gains or losses that are recorded by a business during the period.
- They are nonrecurring, onetime, unusual, non-operating gains, or losses that are recorded by a business during the period.
- In addition to evaluating the regular stream of sales and expenses that produce operating profit, investors also have to factor into their profit performance analysis the perturbations of these irregular gains and losses reported by a business.
- Write down and write off of receivables and inventory are not extraordinary, because they relate to normal business operational activities.They would be considered extraordinary, however, if they resulted from an Act of God (e.g., casualty loss arising from an earthquake) or governmental expropriation.
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- The income statement reflects a company's operating performance.
- It then calculates operating expenses and, when deducted from the gross profit, yields income from operations.
- Non-operating income, in accounting and finance, is gains or losses from sources not related to the typical activities of the business or organization.
- Non-operating income can include gains or losses from investments, property or asset sales, currency exchange, and other atypical gains or losses.
- Non-operating income is generally not recurring and is therefore usually excluded or considered separately when evaluating performance over a period of time (e.g. a quarter or year).
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- EBIT = Earnings Before Interest and Taxes, also called operating profit or operating income.
- It is the difference between operating revenues and operating expenses.
- When a firm does not have non-operating income, then operating income is sometimes used as a synonym for EBIT and operating profit.
- The EBITDA of a company provides insight on the operational profitability of the business.
- When the interest coverage ratio is smaller than 1, the company is not generating enough cash from its operations EBIT to meet its interest obligations.
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- SGA is usually understood as a major portion of non-production related costs, in contrast to production costs, such as direct labor.
- Other expenses or losses not related to primary business operations (e.g., foreign exchange loss).
- Discontinued operations is the most common type of irregular items.
- Discontinued operations must be shown separately.Disclosures
- Explain the difference between the operating and non-operating section of the income statement
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- The operating margin is a ratio that determines how much money a company is actually making in profit and equals operating income divided by revenue.
- It is found by dividing operating income by revenue, where operating income is revenue minus operating expenses .
- Furthermore, the operating margin is simply revenue.
- Since non-operating incomes and expenses can significantly affect the financial well-being of a company, the operating margin is not the only measurement that investors scrutinize.
- The operating margin is found by dividing net operating income by total revenue.
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- Funds typically originate from company sales and earning revenue; other cash sources include the sale of non-current assets and company stock.
- Funds for business operations typically originate from company sales and earning revenue.
- However, a business can also generate cash funds from other sources as well, such as the sale of non-current assets and through the sale of company stock.
- Cash inflows from investing activities involve cash flows associated with non-current assets:
- Sale of a non-current asset (assets, such as land, building, equipment, marketable securities, etc.)
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- The cash flow statement has 3 parts: operating, investing, and financing activities.
- There can also be a disclosure of non-cash activities.
- Non-cash financing activities may include leasing to purchase an asset, converting debt to equity, exchanging non-cash assets or liabilities for other non-cash assets or liabilities, and issuing shares in exchange for assets.
- Statement of cash flows includes cash flows from operating, financing and investing activities.
- Recognize how operating, investing and financing activities influence the statement of cash flows
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- In contrast, a non-profit organization is legally prohibited from making a profit for owners.
- The managers of non-profits must always be aware of that charitable purpose and ensure that the organization's operations conform to those purposes.
- A mutual-benefit non-profit corporation can be non-profit or for profit.
- The management of all three types of organizations (for-profit, non-profit, and mutual-benefit) may have similar responsibilities, such as drafting a budget and ensuring that the organization generates enough revenue to fulfill its operational needs.
- This strategy cannot work for a non-profit or mutual-benefit corporation.