From the course: A Guide to Understanding Financial Statements

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Net operating income

Net operating income

From the course: A Guide to Understanding Financial Statements

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Net operating income

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- [Instructor] And now we have our next profitability metric found on the profit and loss, net operating income. Net operating income is the amount of income that is left over after you subtract out your operating expenses from your gross profit. Put another way, your net operating income can be calculated by taking your gross profit and subtracting out your operating expenses. This is important because it allows you to understand how much in profits are remaining after you operate your business and subtract out those costs. So because of that, you'll find your net operating income right after the operating expenses section. Now, you may also hear the term EBITDA, which many confuse to be the same as net operating income. In reality, EBITDA can be an entirely different metric, which represents your earnings before your interest, taxes, depreciation, and amortization. Just remember that EBITDA does not always equal net operating income. There can be differences. Let's now move on to…

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