Financial modelling terms explained

Gross Operating Income (GOI)

Gross operating income (GOI) is a measure of the profitability of a company's core business activities, which excludes its financing and non-operating activities. GOI is the operating income a company would obtain if it employed no capital assets at all

What Is Gross Operating Income?

Gross operating income is a measure of a company's profitability that takes into account the cost of goods sold and excludes interest and income tax expenses. It is calculated as revenue minus cost of goods sold, minus operating expenses. Operating expenses include items such as salaries and wages, rent, and utilities. Gross operating income can be used to measure the performance of a company's core operations and to compare it to competitors.

How Do You Calculate Gross Operating Income?

The calculation of gross operating income is a relatively simple one. It is calculated by subtracting total operating expenses from total operating revenues. Total operating expenses include all of the company's operating costs, such as labor costs, rent, materials, and advertising. Total operating revenues include all of the company's income from sales, minus returns and allowances. This calculation gives a good estimate of the company's actual profits from its operations.

Who Uses Gross Operating Income?

There is no single answer to this question as there are a variety of users who may find Gross Operating Income (GOI) to be a useful metric. Some of the most common users of GOI include investors, lenders, and management.

Investors may use GOI to gain a better understanding of a company's financial performance and overall health. In particular, investors may be interested in the trend of GOI over time, as well as in the factors that influence GOI (e.g. sales, costs, etc.).

Lenders may also use GOI when assessing a company's creditworthiness. In particular, lenders may look at the trend of GOI over time and compare it to the company's debt service coverage ratio (DSCR). This ratio can help lenders understand how easily the company can cover its debt payments.

Management may use GOI to make decisions about how to allocate resources and to assess the company's overall financial health. For example, management may look at the trend of GOI over time to identify areas where the company is experiencing growth or decline. Additionally, management can use GOI to assess how well the company is performing compared to its peers.

How Do You Interpret Gross Operating Income?

Gross operating income is a measure of a company's profitability that ignores the effects of taxes and interest expenses. It is calculated as revenue minus the cost of goods sold, minus operating expenses. This measure is important because it shows how much money a company is making from its core operations. A high gross operating income indicates that a company is generating a lot of revenue from its operations, while a low gross operating income indicates that a company is struggling to make money.

What Do You Have to Watch out for When You're Performing Gross Operating Income Calculations?

There are a few things to watch out for when performing gross operating income calculations. First, make sure you are using the correct revenue and expense figures. Secondly, make sure you are using the correct period for the calculation (e.g. monthly, quarterly, or annual). Third, make sure you are including all relevant income and expense items in the calculation. Finally, make sure you are using the correct tax rate in the calculation.

Get started today with Causal

Start building your own custom financial models, in minutes not days.