Operating income is a company's earnings from its core operations after it has deducted its cost of goods sold and its general operating expenses. Operating income does not include interest expenses or other financing costs. It also doesn't include income from outside activities of the company, such as income on investments.
Operating income is an important measure of profitability based on a company's operations. It is a main factor in assessing whether a company is profitable. It ignores income or losses outside of a company's normal business activities. It also excludes extraordinary events, such as lawsuits or natural disasters, which in a typical year would not affect the company's bottom line.
Operating income may be expresses mathematically as:
Operating Income = Gross profit - General Operating Expenses - Depreciation Expense
