Operating Income

Definition

The profit a company earns from its operations after subtracting direct costs and other operating expenses, before interest and income taxes.

Operating income shows how much the core business earns after the costs of selling its products or services and running the company. Operating costs can include wages, rent, and marketing. Investors use this line to see how the business is performing before financing and taxes affect bottom-line profit.

Example

Company A has $1,200 in gross profit and spends $500 on rent and other operating expenses. Its operating income is $700.