What is the definition of operating income?

Operating income refers specifically to the profit earned from a company's core business operations, excluding any income derived from non-operational sources such as investments or sales of assets. This measure focuses solely on the revenue generated from the primary activities that the business engages in, subtracting the associated operating expenses such as cost of goods sold and administrative costs.

The emphasis on profit from primary business operations makes this definition particularly relevant for assessing the efficiency and profitability of a company’s core activities, as it provides a clearer picture of how well the company is performing in its primary business endeavors without the influence of peripheral activities. This distinction allows stakeholders, such as investors and analysts, to gauge the operational effectiveness of the business separate from irregular or secondary income streams.