Operating income, also known as operating profit or EBIT (Earnings Before Interest and Taxes), is a financial metric that measures the profit a company generates from its core business operations after deducting operating expenses such as wages, depreciation, and the cost of goods sold (COGS). It excludes non-operating items like interest, taxes, and one-time events, offering a clear view of operational efficiency.

Why operating income matters?

Operating income serves as a key indicator of business health by reflecting how efficiently a company manages its core operations, with consistent or growing figures signaling strong management. Unlike net income, operating income excludes non-operational factors such as interest, taxes, and one-time events, offering a clearer view of ongoing profitability. Additionally, it forms the basis for calculating the operating margin, an important ratio for benchmarking profitability relative to sales.