Operating income
from class: Managerial Accounting Definition Operating income measures the profit a company makes from its core business operations, excluding deductions of interest and taxes. It is calculated by subtracting operating expenses from gross profit.
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Predict what's on your test 5 Must Know Facts For Your Next Test Operating income focuses solely on profits generated from regular business activities, ignoring non-operating expenses. It is a key component in evaluating the performance of an operating segment or project. Higher operating income implies better efficiency and effectiveness in managing operational costs. Operating income is used in calculating important metrics like Return on Investment (ROI) and Residual Income (RI). It excludes non-operational factors such as interest expenses, tax liabilities, or gains/losses from investments. Review Questions How is operating income calculated? Why is operating income important for evaluating an operating segment? What components are excluded when calculating operating income? "Operating income" also found in:
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