Net Operating Income - NOI

A company's operating income after operating expenses are deducted, but before income taxes and interest are deducted. If this is a positive value, it is referred to as net operating income, while a negative value is called a net operating loss (NOL).

Investopedia Says:
NOI is often viewed as a good measure of company performance. Some believe this figure is less susceptible than other figures to manipulation by management.

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Earnings reported by a bank or bank holding company, after deducting normal operating expenses, but before taking gains or losses from sale of securities, other losses and charge-offs, and additions to the reserve account for possible loan losses. Normally, NOI refers to earnings before federal income taxes are paid. Also called net earnings or net income.

Income from property or business after Operating Expenses have been deducted, but before deducting income taxes and financing expenses (interest and Principal Payments). The formula is:

NOI = gross income - operating expenses
Example: A property produces rental income of $100,000 during the year. The expenses incurred are shown in Table 35.

Table 35 Net Operating Income

Operating expenses:

Maintenance $20,000

Insurance 5,000

Property taxes 10,000

Management 10,000

Utilities 15,000

_______

Total operating expenses $60,000

NOI = $100,000 - $60,000 = $40,000 (net operating income)

Debt service:^*

Interest $18,000

Principal 2,000

_______

$20,000

Income taxes^* ($5,000)

^*Excluded from the computation of net operating income.