Income from Operations
What is Income from Operations?
Income from operations is the income a business earns after operating expenses.
How it Works
A trading company will sell goods to customers.
To do this, they will need to buy those goods in the first place.
The amount paid for them is known as the cost of goods sold (C.O.G.S)
The difference between sales and C.O.G.S is known as the gross margin or gross profit.
To operate the business, the business will need to pay for operating expenses.
This includes expenses such as advertising, payroll, rent, marketing, utilities, and insurance.
The difference between gross profit and operating expenses is known as income from operations.
Income from operations is the amount before non-operating expenses.
Non-operating expenses include things like sale or loss on assets and interest.
© R.J. Hickman 2020