Operating Income/Loss

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Operating Income/Loss is the the difference between a company's revenue and expenses, excluding income from sources other than its regular activities and before income deductions.

Operating loss is negative operating income. Operating Income/Loss is synonymous with net operating profit (or loss), operating income (or loss), and net operating income (or loss).

The formula is Operating Income/Loss = Net Revenue - Operating Expenses - Depreciation - Amortization

'Operating Income/Loss measures a company's earning power from ongoing operations. It does not include earnings from non operating operations and the interest and income tax expenses.

Example

  • In 2007, If Company ABC's net revenue was $10 million, Cost of Goods Sold (COGS) was $5 million, Selling, general and administrative expenses was $2 million, and Depreciation and Amortization was $0.5 million. Operating Income is $2.5 million. ($10 - $5 -$2 - $0.5) million. Note: COGS, Selling, general and administrative expenses, and Depreciation and Amortization are operating expenses.
  • In 2008, If Company ABC's net revenue was $12 million, Cost of Goods Sold (COGS) was $8 million, Selling, general and administrative expenses was $5 million, and Depreciation and Amortization was $0.5 million. Operating Loss was $1.5 million or Operating Income was -$1.5 million. ($12 - $8 -$5 - $0.5) million
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