In an income statement, what is the basic formula for calculating operating income?

The calculation of operating income follows the basic structure of an income statement, which focuses on revenues generated from operations and the costs associated with those operations. The correct formula, which is represented in the selected answer, involves subtracting total operating expenses from total revenues.

Operating income is a critical figure as it indicates how much profit a company makes from its core business operations, excluding any income derived from other sources such as interest or investments. Therefore, when revenues are higher than expenses, the result is a positive operating income, demonstrating the company's efficiency and effectiveness in its operational activities. Conversely, if expenses exceed revenues, this will result in a negative operating income, signaling potential problems in the company's operational management.

This fundamental concept is essential for analyzing business performance and is a key indicator used by investors and management to assess a company's operational success and profitability.