Operating income is:
A) A measure of profitability after deducting cost of sales from net sales.
B) A measure of profitability after deducting cost of sales and all expenses incurred in operating the business from net sales.
C) A measure of liquidity after deducting cost of sales from net sales.
D) The equivalent of net sales.

Question

Quizplus · Accepted Answer

Operating income is calculated by subtracting all expenses incurred in operating the business (including cost of sales) from net sales. Therefore, option B is the correct answer. Option A is incorrect because it only deducts cost of sales from net sales, while option C is incorrect because it mentions liquidity instead of profitability. Option D is incorrect because operating income is not equivalent to net sales.

Operating Income Is