Things You'll Need:
- Figures for expenses of the business
- Figures for income of the business
- A calculator
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Step 1
Understand that operating income is profit from your business generated by it's operations. Therefore, it is your gross profit minus your operating expenses. This figure is not only important because it gauges how your business is doing but is needed to calculate other figures, such as the operating margin. The first stage of calculating operating income would be to gather your income and expense figures.
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Step 2
Figure all of your income generated by this companies operations. That would not include investment income you have made by investing in other companies or businesses, for instance.
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Step 3
Figure operating expenses. Operating expenses are divided into three categories: fixed, variable and reserves for replacement. An example of a fixed expense would be property taxes and insurance. Utilities, supplies and management are examples of variable expenses and reserves for replacements is an amount of money reserved to do a major renovation, such as a roof. The reserve for replacement does not necessarily have to be a cash outlay, but an annual charge for a future expense. Expenses not to include would be: Interest payments on loans or income taxes.
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Step 4
Once you have totaled the income and correct expenses, subtract the expenses from the income. Your figure leftover is your operating income.
