What is operating income and operating expenses

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Daya

Daya (Querist)
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09 February 2025 what is operating income and operating expenses
List of operating income and operating expenses.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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12 August 2025 1. Operating Income
Definition:
Operating Income is the profit a company makes from its core business operations before deducting interest and taxes. It reflects how well the company’s main business is performing.

It is also called:
Operating Profit or Earnings Before Interest and Taxes (EBIT)

Operating Income Formula:

Operating Income
=
Gross Profit
−
Operating Expenses
Operating Income=Gross Profit−Operating Expenses
Where Gross Profit = Sales Revenue - Cost of Goods Sold (COGS)

Examples of Operating Income:
This is basically revenue generated from business activities such as:

Sales of goods

Fees for services rendered

Any income directly related to the main business activity

2. Operating Expenses
Definition:
Operating Expenses are the day-to-day costs incurred to run the core business operations, excluding the cost of goods sold.

Types of Operating Expenses:

Selling Expenses: Expenses related to marketing and selling the products.

General and Administrative Expenses (G&A): Costs related to overall management and support services.

Research and Development (R&D) Expenses: (if applicable)

Typical Operating Expenses include:

Operating Expense Category Examples
Salaries and Wages Employee salaries, wages, bonuses
Rent Office rent, factory rent
Utilities Electricity, water, internet
Depreciation & Amortization Asset depreciation
Marketing & Advertising Promotion costs, advertisements
Repairs and Maintenance Repairs to machinery, office equipment
Insurance Business insurance premiums
Office Supplies Stationery, printing
Legal and Professional Fees Fees paid to lawyers, auditors, consultants
Travel and Conveyance Business travel expenses
Other Administrative Costs Telephone, postage, bank charges

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