What is operating income?

Definition of Operating Income

Operating income is defined as a corporation's operating revenues minus its operating expenses.

Operating income will be shown as a subtotal on many corporations' income statements. The amount of operating income is shown before the provision for income tax and before investment income, interest expense, or other non-operating income or expense items.

Operating income is also reported as income from operations, operating earnings, or operating profit.

Major Components of Operating Income

The operating revenues are often described as net sales, while the operating expenses will include the cost of goods sold, selling, general and administrative expenses (SG&A), and perhaps impairment charges. Some of the SG&A expenses may appear as separate amounts such as depreciation and amortization, and research and development.

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