Operating income definition

Operating income is the profit a company earns from its core business operations, before interest and tax. It strips out financing and one-off items to show how the main business performs.

Operating income starts from revenue and subtracts cost of goods sold and operating expenses such as wages, rent, utilities, marketing, depreciation, and administrative costs. It leaves out interest expense, income tax, and investment gains, so it isolates the result of running the business itself.

Operating income sits between two other profit measures. EBITDA adds depreciation and amortisation back to operating income to approximate operating cash flow; net income goes the other way and subtracts interest and tax to reach the final bottom line. Operating income is the core-operations figure that comes before both adjustments.