Answer
Operating income represents the profitability of a company's core operations and is calculated as total revenues minus total operating costs. It excludes nonoperating items like interest revenue and interest cost.
Operating income= Net income + Income tax
Net income, on the other hand, is the company's overall profitability and includes all revenues and costs, both operating and nonoperating. It is calculated as operating income minus income taxes and can also include nonoperating revenues and nonoperating costs, but for simplicity in this context, nonoperating revenues and costs are assumed to be zero.
Net income = Operating income - Income taxes
Work Step by Step
Operating income represents the profitability of a company's core operations and is calculated as total revenues minus total operating costs. It excludes nonoperating items like interest revenue and interest cost.
Operating income= Net income + Income tax
Net income, on the other hand, is the company's overall profitability and includes all revenues and costs, both operating and nonoperating. It is calculated as operating income minus income taxes and can also include nonoperating revenues and nonoperating costs, but for simplicity in this context, nonoperating revenues and costs are assumed to be zero.
Net income = Operating income - Income taxes
