Operating Income

Operating Income is a figure used in accounting that shows how much profit will be available after operating expenses have been deducted. This might include things like rent, repairs, payroll, delivery cost, travel, etc. This does not include things like taxes or interest expenses. Essentially, when the operating income is higher, it tends to signify that a company is more profitable.

The formula: Operating Income = Revenue - Expenses

Why is this important: Operating income is essentially an indirect measure of how efficient a company is operating. In other words, inefficiencies create waste which as we all know cost a company money. Therefore raising this number isn't just about higher profits but also about helping your organization to cut waste, inefficiency, and operating cost.

What to remember: This is a little cliche, but knowledge is power. Knowing this number can give you insight (if used properly) into a company that you may not be able to see just through observing operations.