Investing term

What is Operating income?

Gross profit minus operating expenses — profit from the core business, before interest and taxes.

Operating income is the profit from a company's core business — gross profit minus operating expenses — before interest and taxes are subtracted. It isolates how well the actual business performs, stripping out financing choices and tax quirks. It's a cleaner read on operational health than the bottom line, which can be distorted by debt costs or one-time items.

For example

A company with $4M gross profit and $2.5M of operating expenses has $1.5M of operating income — the earning power of the business itself.

Operating income is taught hands-on in Stage 14 — Reading Financial Statements.

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Related terms

Accounts receivable (A/R)Money customers owe the company for goods or services already delivered but not yet paid.AccrualsAccounting entries that record revenue or expense before cash actually moves.Annual reportThe yearly disclosure that includes audited financials, MD&A, and footnotes — the primary source for serious investors.Balance sheetThe 'photo' statement — what the company owns, what it owes, and what's left for owners, on a single date.
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