Formula for Operating income

1. Operating income = Total Revenue – Direct Costs – Indirect Costs. OR.
2. Operating income = Gross Profit – Operating Expenses – Depreciation – Amortization. OR.
3. Operating income = Net Earnings + Interest Expense + Taxes.

What is the difference between gross profit and operating expenses?

Gross profit is the total revenue minus the expenses directly related to the production of goods for sale, called the cost of goods sold. Derived from gross profit, operating profit reflects the residual income that remains after accounting for all the costs of doing business.

Which is the correct definition of operating expense?

Operating Expense Definition. Operating Expense (OPEX) is the cost that is incurred in the normal course of business and does not include expenses such as the cost of goods sold which are directly related to product manufacturing or service delivery.

Which is not included in operating expense ( OpEx )?

Operating Expense (OPEX) is the cost that is incurred in the normal course of business and does not include expenses such as the cost of goods sold which are directly related to product manufacturing or service delivery.

What does it mean to have a gross expense ratio?

The gross expense ratio includes all fees incurred by the fund including management fees, 12B-1 fees, administrative costs and operating expenses. Investors should compare the gross expense ratio to a fund’s net expense ratio and understand the differences involved.

How are operating expenses subtracted from gross profit?

As you can see from the formula above, operating expenses are subtracted from a business’s gross profit, and the result is the company’s operating income. If you’re a business owner wanting to improve the bottom line, you have several options, but reduce operating expenses may be the best one. Here’s why: