What is an income statement's operating income?

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Multiple Choice

What is an income statement's operating income?

Operating income shows how much a company earns from its core operations before financing costs and taxes. It represents the revenue left after covering the costs tied to producing goods or delivering services and running the business—often described as revenue minus the operating expenses (such as selling, general and administrative costs, plus depreciation and amortization). It excludes interest and taxes, which are considered separately. This focus on operating performance without financing or tax effects is why the correct description is revenue minus operating expenses, excluding interest and taxes. It’s not net income after taxes, since that includes tax effects and financing results, and it’s not gross profit, which only subtracts cost of goods sold from revenue.

Operating income shows how much a company earns from its core operations before financing costs and taxes. It represents the revenue left after covering the costs tied to producing goods or delivering services and running the business—often described as revenue minus the operating expenses (such as selling, general and administrative costs, plus depreciation and amortization). It excludes interest and taxes, which are considered separately. This focus on operating performance without financing or tax effects is why the correct description is revenue minus operating expenses, excluding interest and taxes. It’s not net income after taxes, since that includes tax effects and financing results, and it’s not gross profit, which only subtracts cost of goods sold from revenue.

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