# How much is my operating income?

Computes operating income (income from operations): net revenue minus cost of sales and operating expenses, with gross profit and the operating margin.

- Page: https://www.acalculator.org/finance/operating-income-calculator
- JSON spec: https://www.acalculator.org/finance/operating-income-calculator.json
- Version: 3ec51152a0ca

## Default answer

Example with the default inputs (Revenue (gross sales) $126,000.00, Returns, allowances and discounts $6,000.00, Cost of sales $60,000.00, Operating expenses $13,400.00, Depreciation and amortization $3,600.00): Revenue of $126,000.00 gives net revenue of $120,000.00, gross profit of $60,000.00 and operating income of $43,000.00.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| sales | Revenue (gross sales) | Total sales for the period, before returns, allowances and discounts. |
| ret | Returns, allowances and discounts | Sales taken back or reduced. Leave empty if your revenue is already net. |
| cogs | Cost of sales | What the goods or services sold cost to make or buy (cost of goods sold). |
| opex | Operating expenses | Selling, general and administrative costs, such as rent, salaries, utilities, marketing and research. Not interest or income tax. |
| da | Depreciation and amortization | The part of long-term assets’ cost charged to this period. Leave empty if it is already in operating expenses. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| income | Operating income | Gross profit − operating expenses − depreciation and amortization. |
| net | Net revenue | Gross sales − returns, allowances and discounts. |
| gross | Gross profit | Net revenue − cost of sales. |
| opex | Total operating expenses | Operating expenses + depreciation and amortization. |
| margin | Operating margin | Operating income ÷ net revenue × 100. Shown when net revenue is more than $0. |

## Method

Net revenue = gross sales − returns, allowances and discounts. Gross profit = net revenue − cost of sales. Operating income = gross profit − operating expenses − depreciation and amortization. Operating margin = operating income ÷ net revenue × 100.

## Assumptions

- All amounts are for the same period, from one income statement.
- Operating expenses leave out interest and income tax, which come after operating income.
- Arithmetic is exact on the typed decimals; money shows to the cent and the margin to 2 decimals, halves up.

## Worked examples

1. sales = $126,000.00, ret = $6,000.00, cogs = $60,000.00, opex = $13,400.00, da = $3,600.00 gives income = $43,000.00, net = $120,000.00, gross = $60,000.00, opex = $17,000.00, margin = 35.833333%. Source: U.S. Securities and Exchange Commission, Beginners’ Guide to Financial Statements (net revenues, gross profit, then operating expenses and depreciation deducted to give income from operations). https://www.sec.gov/about/reports-publications/beginners-guide-financial-statements; OpenStax, Principles of Finance, 5.1 The Income Statement (Clear Lake Sporting Goods: gross sales $126,000, returns $6,000, cost of goods sold $60,000, rent $5,500, utilities $2,500, salaries $5,400, depreciation $3,600, operating income $43,000). https://openstax.org/books/principles-finance/pages/5-1-the-income-statement: 126,000 − 6,000 = 120,000.
2. sales = $105,000.00, ret = $5,000.00, cogs = $50,000.00, opex = $9,500.00, da = $2,500.00 gives income = $38,000.00, net = $100,000.00, gross = $50,000.00, opex = $12,000.00, margin = 38%. Source: OpenStax, Principles of Finance, 5.1 The Income Statement (Clear Lake Sporting Goods: gross sales $126,000, returns $6,000, cost of goods sold $60,000, rent $5,500, utilities $2,500, salaries $5,400, depreciation $3,600, operating income $43,000). https://openstax.org/books/principles-finance/pages/5-1-the-income-statement (prior year: gross sales $105,000, returns $5,000, cost of goods sold $50,000, depreciation $2,500, operating income $38,000).
3. sales = $48,250.75, cogs = $31,400.25, opex = $19,000.50 gives income = -$2,150.00, net = $48,250.75, gross = $16,850.50, margin = -4.455889%.
4. sales = $0.00, cogs = $0.00, opex = $25,000.00 gives income = -$25,000.00, net = $0.00, gross = $0.00.

## FAQ

### What is operating income?

Operating income, also called income from operations or operating profit, is what a business earns from its main activity. It is revenue minus the cost of sales and the operating expenses, before interest and income tax.

### How do I calculate operating income?

Start with net revenue, subtract the cost of sales to get gross profit, then subtract operating expenses and depreciation. Clear Lake Sporting Goods had net sales of $120,000, cost of goods sold of $60,000 and $17,000 of operating expenses, so its operating income was $43,000.

### What counts as an operating expense?

Costs of running the business that are not part of making the product: salaries of office staff, rent, utilities, marketing, research and depreciation. The SEC's guide notes that these costs cannot be linked directly to the goods or services sold.

### Is operating income the same as EBIT?

Often, yes. Operating income is earnings before interest and taxes when a company has no other income or expenses outside its operations. If it has gains, losses or investment income below operating income, EBIT and operating income differ by those items.

### How is operating income different from net income?

Net income comes after interest and income tax. Clear Lake had operating income of $43,000, paid $2,000 of interest and $6,000 of income tax, and so had net income of $35,000.

### Can operating income be negative?

Yes. If the cost of sales and operating expenses are more than net revenue, the business has an operating loss. Net revenue of $48,250.75 with $50,400.75 of costs gives an operating loss of $2,150.

## Sources

- U.S. Securities and Exchange Commission, Beginners' Guide to Financial Statements: gross revenues less returns and allowances are net revenues; net revenues less the costs of sales are gross profit; gross profit less operating expenses and depreciation is income from operations, before interest and income tax. https://www.sec.gov/about/reports-publications/beginners-guide-financial-statements (retrieved 2026-10-19)
- OpenStax, Principles of Finance, 5.1 The Income Statement: the Clear Lake Sporting Goods income statement (gross sales $126,000 and $105,000, returns and allowances $6,000 and $5,000, cost of goods sold $60,000 and $50,000, depreciation $3,600 and $2,500, operating income $43,000 and $38,000, interest $2,000, income tax $6,000, net income $35,000). https://openstax.org/books/principles-finance/pages/5-1-the-income-statement (retrieved 2026-10-19)