What Is Operating Income?
Operating Income Definition
Operating income is also known as operating profit, and is sometimes referred to as EBIT, or Earnings Before Interest and Taxes.
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Define Operating Income in Simple Terms
Operating income and income from operations are synonymous. Operating income is the amount of profit a company has after paying for all expenses related to its core operations.
Operating Income Formula
To calculate income from operations, just take a company’s gross income and subtract the operating expenses.
The remaining value is the operating income.
How to Find Operating Income
Operating income is recorded as a figure on a company’s income statement.
The income statement structure tends to list items from the most inclusive (total revenue) down to the most exclusive (net income), so operating income will be somewhere nearer the top.
Operating Income Meaning
Operating income is the amount of profit a company has after deducting operating expenses from total revenue.
Operating expenses include any costs associated with running a business, such as wages and COGS.
Operating Income Examples
As an example of how to calculate operating income, imagine a company that has a gross profit of $1 million and operating expenses of $250,000.
The company’s operating income would be $1 million minus $250,000, or $750,000.
Gross Operating Income
What Is Vacancy Loss?
Vacancy loss refers to theoretic income that is not being made while a unit sits unoccupied. Credit loss occurs when a tenant either does not deliver a rent check or the check does not clear.
Operating Income (Income From Operations) FAQs
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.