operating income

operating income

The excess of revenues over expenses derived from normal business operations. Operating income, representing income from ordinary business activities, excludes expenses, such as interest and taxes. Unusual nonrecurring items, such as gains from selling a subsidiary or losses from closing a plant, are not included in the calculation of operating income. Also called earnings before interest and taxes, operating profit. Compare operating loss. See also operating revenue.

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Operating Income

A company's income from the goods and services it provides, less its operating expenses and depreciation. The operating income does not include losses from interest payments or income tax. For example, a widget manufacturer earns $1,000,000 in gross revenue from the sale of widgets. The widgets cost $200,000 to make and his administrative and payroll expenses total $250,000. He also must subtract $50,000 in depreciation on his widget manufacturing equipment. His operating income is stated as: $1,000,000 - $200,000 - $250,000 - $50,000 = $500,000. Operating income is closely related to earnings before interest and taxes (EBIT), but EBIT includes nonoperating income, which is usually (but not always) significantly less than operating income. See also: Net income.

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operating income

See net operating income.

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Operating Income

What Does Operating Income Mean?

The amount of profit realized from a business's own operations, excluding operating expenses (such as cost of goods sold) and depreciation from gross income. Also referred to as operating profit and recurring profit. It is calculated as shown here:

Investopedia explains Operating Income

Operating income does not include items such as investments in other firms, taxes, and interest expenses. In addition, nonrecurring items such as cash paid for a lawsuit settlement often are not included. Operating income is necessary to calculate operating margin, which describes a company's operating efficiency.

Related Terms:
• Cash Conversion Cycle
• Cost of Goods Sold—COGS
• Gross Income
• Net Operating Income—NOI
• Operating Expenses