Term
Operating Income
is also know as |
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Definition
| earnings before interest and tax (EBIT) or profit before interest and tax (PBIT) |
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Term
Operating Income
is defined as |
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Definition
| the income reported in the income statement of the company before taking account of the interest and taxation. |
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Term
| How to arrive at the operating income figure |
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Definition
1.) Determine the gross profit. Info can be found in the I.S.,and should include all revenue generated from the business over a set period of time. It is calculated by subtracting the cost of goods sold from net sales.
2.) Calculate total operating expenses. This info. can be found in the balance sheet,and should include expenses such as advertising, office and supplies expenses, license fees, insurance and vehicle expense.
3.) Subtract operating expenses from gross profit. This is the total operating income for this period.
4.) Post this information in the income statement. The operating income is posted directly below the Operating Revenues and Operating Expenses section of the income statement and the value of Earnings before interest and income taxes (EBIT) is derived from this final calculation. |
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Term
| Operating Income tells you what about a company? |
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Definition
| Operating Income indicates how expensive it is to maintain business operations and produce a certain amount of profit. |
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Term
Operating Income
Calculation |
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Definition
Sales revenue $410,000
Less: Cost goods sold (215,000)
General & admin. expenses (51,000)
Restructuring costs (61,000)
Selling expenses (30,500)
Operating income $52,500 |
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Term
Income (loss)
calculation |
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Definition
Operating income $52,500
Add: Interest revenue 4,000
Deduct: Loss on sale of invst (44,000)
Income before income taxes & extraordinary item 12,500 Income tax exp (40% x 12,500) (5,000)
Income before extraordinary item $7,500 |
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Term
Net Income (loss)
calculation |
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Definition
Income before extraordinary item $7,500
Extraordinary item:
Loss from flood damage, net of
$22,200 tax benefit (33,300)
Net loss ($25,800) |
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