Total Operating Income (as Reported)
The Official Profit from Core Business Operations
Total Operating Income (as reported) refers to the profit earned from a companyâs core business operations, as officially stated in its financial statements. In other words, it is the operating profit of the company according to GAAP/IFRS accounting, often synonymous with âincome from operationsâ or EBIT (Earnings Before Interest and Taxes). This figure represents how much profit the company generates from its regular business activities before considering any financing costs (interest) or tax expenses. Being âas reportedâ means this is the exact figure disclosed in the income statement under standard accounting rules, without any further adjustments.
Calculation and Key Components
Operating income is calculated by starting with gross profit and then subtracting all operating expenses.
Calculation Breakdown
- Gross Profit: This is the starting point, representing profit after direct production costs (Revenue - COGS).
- Operating Expenses: These are the day-to-day costs of running the business, including Selling, General & Administrative (SG&A) costs and Research & Development (R&D).
- Depreciation & Amortization: These are non-cash expenses that allocate the cost of assets over their useful lives. They are considered part of operating expenses and reduce operating income.
What's Included vs. Excluded
- Included: All revenues and expenses related to the company's primary business activities, such as sales, COGS, salaries, marketing, rent, and R&D.
- Excluded: Items below the operating line, notably interest expense/income, taxes, and other non-operating gains or losses (e.g., income from investments).
'As Reported' vs. Adjusted (Non-GAAP) Operating Income
The label âas reportedâ signifies that the operating income is presented exactly as per the companyâs official financial reports under GAAP/IFRS. Companies often also discuss âadjustedâ or ânon-GAAPâ operating income, which starts with the reported figure but excludes certain items to present what management considers a clearer view of core performance.
Common Adjustments in Non-GAAP Metrics
- Restructuring charges or one-time legal settlements: Large, infrequent costs that are not expected to recur.
- Impairments or write-downs: A significant non-cash charge from writing down the value of an asset like goodwill.
- Acquisition-related amortization: Amortization of intangible assets that came from a past acquisition.
- Other one-off expenses: Anything unusual, such as disaster-related costs or merger integration expenses.
A Note on EBITDA
A related non-GAAP metric is EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This is not the same as operating income. The as-reported operating income already includes depreciation and amortization as expenses, whereas EBITDA adds them back. Therefore, operating income (EBIT) will always be lower than EBITDA.
Example on an Income Statement
Operating Income is a key subtotal on a multi-step income statement, appearing after all operating costs have been deducted from gross profit. The example of Amazon's 2016 income statement highlights its placement.
Amazon.com Inc. (2016 Excerpt)
Key Takeaways
Total Operating Income (as reported) is the official operating profit of a company, calculated according to GAAP or IFRS.
It is computed as Gross Profit minus all operating expenses, including SG&A, R&D, and depreciation/amortization.
The term âas reportedâ distinguishes this official figure from âadjustedâ or ânon-GAAPâ metrics that companies may provide, which exclude certain one-time or non-cash items.
It is synonymous with EBIT (Earnings Before Interest and Taxes) and provides a clear view of a company's core operational efficiency.
This metric allows for a more direct comparison of the fundamental business performance between different companies, as it removes the effects of financing and tax structures.
Related Terms
Total Operating Income (as Reported)
The Official Profit from Core Business Operations
Total Operating Income (as reported) refers to the profit earned from a companyâs core business operations, as officially stated in its financial statements. In other words, it is the operating profit of the company according to GAAP/IFRS accounting, often synonymous with âincome from operationsâ or EBIT (Earnings Before Interest and Taxes). This figure represents how much profit the company generates from its regular business activities before considering any financing costs (interest) or tax expenses. Being âas reportedâ means this is the exact figure disclosed in the income statement under standard accounting rules, without any further adjustments.
Table of Contents
Calculation and Key Components
Operating income is calculated by starting with gross profit and then subtracting all operating expenses.
Calculation Breakdown
- Gross Profit: This is the starting point, representing profit after direct production costs (Revenue - COGS).
- Operating Expenses: These are the day-to-day costs of running the business, including Selling, General & Administrative (SG&A) costs and Research & Development (R&D).
- Depreciation & Amortization: These are non-cash expenses that allocate the cost of assets over their useful lives. They are considered part of operating expenses and reduce operating income.
What's Included vs. Excluded
- Included: All revenues and expenses related to the company's primary business activities, such as sales, COGS, salaries, marketing, rent, and R&D.
- Excluded: Items below the operating line, notably interest expense/income, taxes, and other non-operating gains or losses (e.g., income from investments).
'As Reported' vs. Adjusted (Non-GAAP) Operating Income
The label âas reportedâ signifies that the operating income is presented exactly as per the companyâs official financial reports under GAAP/IFRS. Companies often also discuss âadjustedâ or ânon-GAAPâ operating income, which starts with the reported figure but excludes certain items to present what management considers a clearer view of core performance.
Common Adjustments in Non-GAAP Metrics
- Restructuring charges or one-time legal settlements: Large, infrequent costs that are not expected to recur.
- Impairments or write-downs: A significant non-cash charge from writing down the value of an asset like goodwill.
- Acquisition-related amortization: Amortization of intangible assets that came from a past acquisition.
- Other one-off expenses: Anything unusual, such as disaster-related costs or merger integration expenses.
A Note on EBITDA
A related non-GAAP metric is EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This is not the same as operating income. The as-reported operating income already includes depreciation and amortization as expenses, whereas EBITDA adds them back. Therefore, operating income (EBIT) will always be lower than EBITDA.
Example on an Income Statement
Operating Income is a key subtotal on a multi-step income statement, appearing after all operating costs have been deducted from gross profit. The example of Amazon's 2016 income statement highlights its placement.
Amazon.com Inc. (2016 Excerpt)
Key Takeaways
Total Operating Income (as reported) is the official operating profit of a company, calculated according to GAAP or IFRS.
It is computed as Gross Profit minus all operating expenses, including SG&A, R&D, and depreciation/amortization.
The term âas reportedâ distinguishes this official figure from âadjustedâ or ânon-GAAPâ metrics that companies may provide, which exclude certain one-time or non-cash items.
It is synonymous with EBIT (Earnings Before Interest and Taxes) and provides a clear view of a company's core operational efficiency.
This metric allows for a more direct comparison of the fundamental business performance between different companies, as it removes the effects of financing and tax structures.
Related Terms
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