Listen to a Business English Dialogue About Operating income
Isabella: Hi Stella, do you know what operating income is in business and finance?
Stella: Yes, I do. Operating income is the profit a company earns from its core business operations, excluding interest and taxes.
Isabella: That’s right. How is operating income calculated?
Stella: Operating income is calculated by subtracting operating expenses, such as cost of goods sold and operating expenses, from total revenue.
Isabella: I see. Why is operating income an important metric for businesses?
Stella: Operating income is important because it indicates how well a company’s core business activities are performing and provides insight into its profitability before considering other factors like interest and taxes.
Isabella: Got it. Can you give me an example of how operating income is used in financial analysis?
Stella: Sure, financial analysts use operating income to assess a company’s operational efficiency, compare its performance to competitors, and evaluate its ability to generate profits from its main business activities.
Isabella: Thanks for explaining, Stella. Operating income seems like a key metric for understanding a company’s financial health.
Stella: You’re welcome, Isabella. Indeed, it provides valuable insights into a company’s operational performance and profitability.
