metrics explained

Operating Income vs Operating Expense: What's the Difference?

Operating income and operating expense are two key financial metrics that businesses use to gauge their financial performance. Operating income is a measure of a company's profitability, while operating expense is a measure of a company's costs. Both metrics are important in assessing a company's financial health and in making decisions about where to allocate resources.

Operating income is calculated as a company's revenue from operations, minus its operating expenses. Operating expenses include things like cost of goods sold, selling, general and administrative expenses, and depreciation and amortization. Operating income is a good measure of a company's profitability because it excludes non-operating items like interest expense and taxes.

Operating expense, on the other hand, is a measure of a company's costs. It includes all the expenses that a company incurs in order to generate revenue. Operating expense is a good measure of a company's efficiency because it shows how much it costs to generate each dollar of revenue.

Operating income and operating expense are both important metrics for assessing a company's financial performance. However, they are not the same thing. Operating income is a measure of profitability, while operating expense is a measure of costs. As such, they should be considered together when making decisions about where to allocate resources.

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