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Income statement

Operating income

Profit from the core business after all operating costs (COGS, SG&A, R&D, depreciation) but before interest and tax. Also called operating profit or EBIT.

Operating income is what the core business earns once every cost of running it is out: the product's direct cost (COGS), the overheads (SG&A), research, and depreciation, but before interest and tax. It is often called EBIT, earnings before interest and tax.

The point of stopping there: interest depends on how much the company borrowed, and tax on where it operates, neither of which says anything about how well the business itself runs. Stripping both out makes it a fair basis for comparing two companies. As a share of revenue it is the operating margin.

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