What is meant by 'operating income'?

Operating income refers to the earnings generated from a company's normal business operations, specifically the revenue that remains after subtracting the costs of goods sold (COGS) and operating expenses from gross income. This measure is often used to evaluate a company's efficiency in managing its core business and to assess the profitability of its core operations, excluding the effects of financing and non-operating income or expenses.

By focusing solely on the income derived from regular business activities, operating income provides insights into how well a company can generate profit through its primary business activities. This is a critical metric for stakeholders to analyze, as it reflects the operational performance without the influence of outside factors like interest or taxes, which are accounted for in other profit measures.