Income which is generated by normal business basic operating activities is called net operating income while other income then operating income is called non operating income like interest income or dividend income etc.
Gross profit = sales revenue - cost of goods sold Operating Cash Flow = net income (after all expenses) + increase in operating liabilities (payables, etc) - increase in operating assets (receivables, inventory, etc)
Net profit can be increased by income from non operating activities of business like dividend income or interest income etc.
Total operating income less total operating expense = net operating income (or loss if the expenses were higher)
operating expenses/operating income
Income which is generated by normal business basic operating activities is called net operating income while other income then operating income is called non operating income like interest income or dividend income etc.
The operating income increases when a company makes more products than it can sell in a period. It is cheaper to produce more at one time and the profits increase because the price stays the same.
Gross profit = sales revenue - cost of goods sold Operating Cash Flow = net income (after all expenses) + increase in operating liabilities (payables, etc) - increase in operating assets (receivables, inventory, etc)
Net profit can be increased by income from non operating activities of business like dividend income or interest income etc.
Total operating income less total operating expense = net operating income (or loss if the expenses were higher)
operating expenses/operating income
Operating income is that income which is earned through primary business activity while non operating income is that part of income which is not generated through primary operations of business like interest income, dividend income etc.
The degree of operating leverage (DOL) is calculated by dividing the percentage change in operating income by the percentage change in sales revenue. It helps measure the sensitivity of operating income to changes in sales revenue. The formula is DOL = % change in operating income / % change in sales revenue.
Target Net income = (Target Operating income)-(Target Operating income x Tax rate) Target operating income = (Revenues-Variable costs)- Fixed Costs
Target Net income = (Target Operating income)-(Target Operating income x Tax rate) Target operating income = (Revenues-Variable costs)- Fixed Costs
Gross ProfitLess: Operating expensesOperating income
DOL is a ratio that is used to identify the changes in the operating leverage that a company requires with growth in sales and income. As and when a company grows and its sales increases, the operating costs also increase and the operating leverage required by the promoters also changes. This ratio helps us identify that value.Formula:DOL = Percentage Change in Net Operating Income / Percentage Change in Sales