Operating Income
Definition
Profit from your core business before interest and taxes: gross profit minus operating expenses.
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Formula
Operating Income = Gross Profit − Operating ExpensesOperating income shows how well the business itself performs, separate from how it is financed. Lenders and buyers look at it closely.
It is close to EBIT, and adding back depreciation and amortization gives EBITDA. Watch for: one-time gains or losses mixed into operating lines, which distort the trend.
Example
$1.05M of gross profit minus $880,000 of operating expenses gives $170,000 of operating income.