Net Operating Income

Net Operating Income

The profit generated from a company’s core business operations before deducting interest and taxes, measuring operational performance independent of financing and tax considerations.

For example, a retail chain might report quarterly revenue of $10 million, cost of goods sold of $6 million, and operating expenses of $3 million, resulting in net operating income of $1 million or 10% of revenue, regardless of how the business is financed.

Also called operating profit or operating income, this metric focuses on the results of primary business activities, excluding non-operating items like interest expense, investment income, and tax obligations. It provides insight into management’s effectiveness at generating profits from core operations and facilitates comparing operational efficiency across companies with different capital structures or tax situations.