CHAPTER 8

Operating Income

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A second key number is operating income. It’s right on the income statement. It sometimes appears as operating earnings or operating profit.

Chapter 6 sketched out the organization of the income statement. It starts with revenue, subtracts cost of goods sold, subtracts operating expenses, and ends with income. But as the LinkedIn case study showed, there are four different measures of income. Revisiting them makes clear why operating income is particularly useful.

Operating income is the topmost measure of income on the income statement. It’s revenue, minus cost of goods sold, minus operating expenses.

To operating ...

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