Definition
Operating income equals gross profit minus operating expenses (SG&A, R&D). It represents profit from the company's core business before financing costs and taxes. EBIT (Earnings Before Interest and Taxes) is often used interchangeably, though some definitions differ slightly.
Formula
Operating Income = Gross Profit - Operating Expenses = Revenue - COGS - SG&A - R&D
Example
Gross profit of $65M minus $40M in operating expenses (sales, marketing, R&D, admin) equals $25M operating income, or 25% operating margin on $100M revenue.
FAQ
What is Operating Income (EBIT)?
Profit from core operations before interest and taxes.
How do you calculate Operating Income (EBIT)?
A common formula for Operating Income (EBIT) is: Operating Income = Gross Profit - Operating Expenses = Revenue - COGS - SG&A - R&D
Why is Operating Income (EBIT) important?
Operating Income (EBIT) helps investors evaluate financial statements and make more informed decisions.