Focus on sustainability<\/strong>: Operating income is a key indicator of a company’s ability to sustain profitability over the long term. It assesses the profitability of the company’s core operations, which are crucial for its ongoing viability.<\/p>\nUnderstanding a company’s operating income is essential for investors, creditors, and analysts as it provides insights into the profitability of a company’s core operations and its ability to generate profits from its primary business activities.<\/p>\n
Example of operating income<\/h3>\n
Let’s consider a fictional company, XYZ Electronics, which manufactures and sells electronic gadgets. In a given year, XYZ Electronics generates $2,000,000 in revenue from selling its products. The company incurs various operating expenses directly related to its core business operations totalling $1,500,000.<\/p>\n
To calculate the operating income for XYZ Electronics, we subtract the total operating expenses from the revenue:<\/p>\n
Operating Income = $2,000,000 – $1,500,000 = $500,000<\/p>\n
Therefore, the operating income for XYZ Electronics is $500,000. This represents the profit earned by the company from its primary business activities before deducting interest and taxes.<\/p>\n","protected":false},"author":1,"template":"","class_list":["post-28667","business-glossary","type-business-glossary","status-publish","hentry"],"acf":[],"featured_image_urls_v2":{"full":"","thumbnail":"","medium":"","medium_large":"","large":"","1536x1536":"","2048x2048":"","image_blog":"","image_podcast":"","image_banking":"","image_blog_internal":"","image_blog_medium":"","image_single_banking":""},"post_excerpt_stackable_v2":"
Definition Operating income, also known as operating profit or operating earnings, is a key financial metric that represents the profit a company generates from its core business operations. What is an operating income? The operating income reflects the income derived from a company’s primary activities before considering interest expenses and taxes. Here are some key points about operating income: 1. Core business activities: Operating income excludes income from non-operating sources, such as investments, interest, and one-time gains or losses. It focuses solely on the revenue and expenses directly related to the company’s primary operations. 2. Calculation: Operating income is calculated…<\/p>\n","category_list_v2":"","author_info_v2":{"name":"root","url":"https:\/\/swoopfunding.com\/ca\/author\/root\/"},"comments_num_v2":"0 comments","_links":{"self":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/business-glossary\/28667","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/business-glossary"}],"about":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/types\/business-glossary"}],"author":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"version-history":[{"count":3,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/business-glossary\/28667\/revisions"}],"predecessor-version":[{"id":34701,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/business-glossary\/28667\/revisions\/34701"}],"wp:attachment":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/media?parent=28667"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}