Income from operations

Definition

Income from operations, also known as operating income, is the profit realized from a business's normal core operations. It excludes non-operating income and expenses such as taxes and interest.

5 Must Know Facts For Your Next Test

1. Operating income is calculated by subtracting operating expenses from gross profit.
2. It does not include revenue or expenses that are not directly tied to the company's primary business activities.
3. Depreciation and amortization are typically included in operating expenses when calculating income from operations.
4. Income from operations provides insight into the efficiency and profitability of a company's core business activities.
5. It is a key component of multi-step income statements, which distinguish between operating and non-operating activities.

Review Questions

Related terms

Gross Profit:

The difference between net sales and the cost of goods sold.

Non-Operating Income: Revenue earned from activities outside a company's primary business operations.

Depreciation:

The allocation of the cost of a tangible asset over its useful life.