Operating Income

Operating income is a measure of a company's profitability. It is calculated by taking a company's net income and adding back any non-operating expenses, such as interest expense and taxes. Operating income is important because it shows how much money a company is making from its core business operations.

There are a few different ways to calculate operating income. The most common method is to use the following formula:

Operating income = Net income + Non-operating expenses

Net income is a company's profit after all expenses have been deducted. Non-operating expenses are expenses that are not directly related to a company's core business operations. Examples of non-operating expenses include interest expense, taxes, and depreciation.

Another way to calculate operating income is to use the following formula:

Operating income = Revenue - Cost of goods sold - Selling, general, and administrative expenses

Revenue is the amount of money a company brings in from its sales. Cost of goods sold is the cost of producing the goods that a company sells. Selling, general, and administrative expenses are the expenses that a company incurs in order to sell its products and services.

Operating income is an important measure of a company's profitability because it shows how much money a company is making from its core business operations. A company with a high operating income is more profitable than a company with a low operating income.

There are a few things to keep in mind when interpreting operating income. First, operating income can be affected by a number of factors, such as the company's sales volume, cost of goods sold, and selling, general, and administrative expenses. Second, operating income is not the same as cash flow from operations. Cash flow from operations is a measure of the amount of cash a company generates from its business operations. Operating income is a measure of the company's profitability, but it does not take into account the timing of cash flows.

Overall, operating income is an important measure of a company's profitability. However, it is important to keep in mind that operating income can be affected by a number of factors and that it is not the same as cash flow from operations.