What Is the Formula to Calculate Operating Income

question 142

Multiple Choice

What is the formula to calculate operating income?

• A) sales revenue - selling and administrative expenses
• B) gross margin - selling expenses + selling and administrative expenses
• C) sales revenue - cost of goods sold + selling and administrative expenses
• D) sales revenue - cost of goods sold - selling and administrative expenses

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Definitions:

Operating Leverage

The degree to which a firm or project can increase operating income by increasing revenue, reflecting fixed versus variable costs.

Profits

The financial gain realized when the revenues generated from business operations exceed the expenses, taxes, and costs incurred.

GDP

Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.

Sales Opportunity

A situation or instance where there is a potential for a business to sell its products or services, often identified through marketing and analysis.