A company's taxes get figured into its profit and loss statements when they report their results. In these situations, companies often break out before-tax income and after-tax income.
The goal here is to let investors know just where the money is going. Operating income is a slightly more specific version of income. It often leaves out certain items, including things like interest and depreciation. Operating income also allows investors to compare companies and parts of companies on a somewhat neutral footing. Like how nerdy baseball fans will take out park effects and create defense-neutral pitching statistics, operating income makes it easier to compare the underlying profitability of different businesses that might run in highly different environments. An example might include a company that has operations in different countries, each with its own tax, accounting, and regulatory framework.
So after-tax operating income gives a dollars-in, dollars-out look at the company's business operations, leaving out things that investors might consider extraneous, like what it costs to run a government, or what it costs to borrow money to start the business in the first place.
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Finance: What are operating expenses?2 Views
Finance allah shmoop what are operating expenses Well simply put
operating expenses are the expenses it takes to operate a
business Yeah in sort of big fat dog here but
why would they be called out separate from any other
expenses You know manish thana like what other expenses are
there anyway that aren't operating All right Well we'll noodle
the notion here for a moment Noodling noodling Well if
you are running a drone making plant while your operating
expenses are things like the cost of plastic molds for
the drone itself batteries computer chips for the brains of
the drone computer chips to communicate wirelessly with the controller
copter blades lights packing material labour to put all this
together and then they're shipping containers Don't forget shipping containers
The drones don't just fly to the customer way need
pretty ribbons on them anyway Never mind on that part
so all of the above our core operating expenses they're
part of what comprises the gross profits of the company
The revenue minus the cost actually make the product but
to fully operate the business you need to include a
ton of other things like paying for insurance rent for
ah building You need lawyers because they always need lawyers
and and there's secretaries and other bureaucrats Teo you know
do stuff run things Yeah well added up those operating
expenses when subtracted from revenues while they give you operating
profits or crete acts profits And there are other expenses
like capital expenses That is you spend one hundred million
box on a factory teo stamp out drones or whatever
And that cash is spent immediately upfront but factory last
twenty years So well you know what do you do
Well yeah You take five million a year to straight
lined appreciate factory too Zero after it's used up Well
you might also have acquired patents which are similarly written
down in value or advertised away as their value slowly
fades with time like shmoop writers So what's left Well
what comes after operating profits Well taxes on dividends and
a bunch of other crap like you know if the
company had invested in things that had to be written
up or down and other branham stuff it's all out
there after operating expenses But a key idea here is
that operating expenses are more or less Quote everything unquote
That it takes to run the business except taxes in
dividend obligations which aren't counted in this calculation So now
that you have a handle on what comprises operating expenses
well you too can be a no smooth operator Shod
a member Ask your parents in oh no she's a 00:02:53.33 --> [endTime] smooth operator
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