How to Calculate Company Operating Income, With Examples!

For businessmen, it is important to know whether the business being run is effective or not. One way can be known by calculating the company's operating income.

Operating income is an important factor for a company, which is a measure of how advanced and profitable the company is. The greater the income, the greater the potential for the company to advance.

Definition Operating Income Company

Before knowing the definition of operating income or operating income, Let's first get to know the basic definition of income.

In economics, income is the result of all sales activities of goods or services of a company, within a certain period of time, which are recorded in the company's books.

Meanwhile, operating income is the result of business operations, or the remaining amount of company profit, after deducting direct and indirect operating costs, from sales revenue.

For the record, operating income is different from the net income and gross income of the company. This income does not include other income, non-operating expenses and non-operating income.

The operating income figure itself is obtained from several components. Such as cost of goods sold, wages, depreciation and so on. This figure can describe the core profitability and management success of the company.

So, how is the calculation so that the operating income figure can be known?

Count Formula Operating Income Company

Operating income is calculated by taking the company's total revenue minus the cost of goods sold, which is equal to gross revenue and minus all operating expenses.

The formula that can be used to calculate operating income is:

Counting Steps Operating Income Company

The following is a simulation of calculating operating income in several steps, using one case example.

Sample case:

Kinan is the owner of ABC company. As his company grows, he intends to settle his loan and interest payments at the bank, so that his company still has a good reputation.

Then, Kinan contacted his accountant to collect the company's financial statements, so that the company's operating income could be calculated, to ensure he complied with his business loan agreement.

As it turned out, his company had a gross income of Rp 400.000.000. Then, this year, the company's Cost of Goods Sold is Rp. 50.000.000, rental costs are Rp. 15.000.000, insurance is Rp. 12.000.000, and workers' wages are Rp. 50.000.000.

Here's how to calculate operating income from ABC Company:

• It is known, the company's gross income = 400.000.000
• Calculate the total operating costs or expenses, which in the case examples are mentioned separately.

• Cost of Goods Sold = 50.000.000
• Apply the formula.

• Thus, the result of operating income from ABC Company is Rp. 273.000.000.