Operating Income

How to read it

Operating Income is a reported line item, so stockrow shows the figure as the company states it rather than working it out. It is what is left of revenue once the costs of running the business — the cost of the goods or services sold and the operating expenses such as selling, general, administrative and research spending — have been taken away. It rises when sales grow faster than those costs, and falls when costs climb or revenue slips. Statement tables show it in millions, for each quarter, each year and the trailing twelve months.

What is typical

The size of the figure depends on the size of the company, so it says most when compared with the company’s own history or turned into a margin. Businesses with high fixed costs can see it swing sharply as sales move, while those with steadier costs tend to show a smoother line. Compare the ratios built on it with the sector medians.

Pitfalls

Companies decide which items sit above or below this line, so one-off charges or gains can be included in one year and not another. Several stockrow figures are built from it — the three-, five- and ten-year Operating Income growth rates, Operating Income Growth, Return on Invested Capital and Price to Operating Income — so an unusual year here carries through to all of them.