This operating income template shows you how to calculate operating income using line items from the income statement.
This is what the operating income template looks like:
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Operating income, also referred to as Earnings Before Interest & Taxes (EBIT), is the amount of revenue left after deducting the operational direct and indirect costs from sales revenue. This can also be computed using gross income less depreciation, amortization, and operating expenses not directly attributable to the production of goods. Interest expense, interest income, and other non-operational revenue sources are not considered in computing for operating income.
There are three formulas to calculate income from operations:
1. Operating income = Total Revenue – Direct Costs – Indirect Costs
3. Operating income = Net Earnings + Interest Expense + Taxes
Another way to calculate income from operations is to start at the bottom of the income statement at Net Earnings and then add back interest expense and taxes. This is a common method used by an analyst to calculate EBIT, which can then be used for valuation in the EV/EBIT ratio.
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Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy.
A well rounded financial analyst possesses all of the above skills!
Additional Questions & Answers
CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.
In order to become a great financial analyst, here are some more questions and answers for you to discover:
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