Operating revenue, also known as operating income or operating earnings, is the revenue a company generates from its primary business activities, excluding any revenue earned from investments or other non-operating sources.
Operating revenue is an important metric for measuring a company's profitability from its core business operations. It is calculated by subtracting the cost of goods sold (COGS) and other operating expenses from the total revenue earned from the sale of products or services.
Operating revenue represents the amount of money that a company earns from its day-to-day operations, such as manufacturing and selling goods or providing services to customers. This revenue is critical for covering the expenses required to run the business, including labor, materials, marketing, rent, and other operational costs.
Operating revenue is a key metric for investors and analysts when evaluating a company's financial health and profitability. A company that is generating consistent and growing operating revenue over time is generally viewed as a more attractive investment than one with declining revenue or high operating expenses.
Overall, operating revenue is an important metric for assessing a company's performance and profitability from its core business activities. It provides valuable insights into the strength of a company's operations and its ability to generate sustainable revenue growth over time.
Operating revenue can be reported on a company's income statement, which breaks down the company's revenue and expenses into different categories to provide a detailed picture of its financial performance. The income statement includes operating revenue, as well as other financial metrics such as gross profit, operating expenses, and net income.
Operating revenue is important for assessing a company's ability to generate cash flow from its core business activities, which is critical for its long-term success. A company with strong operating revenue can reinvest in the business, pay down debt, and return value to shareholders through dividends or share buybacks.
Investors and analysts often compare a company's operating revenue to its competitors and to industry benchmarks to evaluate its performance relative to its peers. High operating revenue growth rates are generally seen as a positive indicator of a company's ability to generate value from its operations, while declining or stagnant operating revenue growth rates may indicate issues with the company's business model, market conditions, or competitive environment.
In summary, operating revenue is a key metric for evaluating a company's financial performance, profitability, and growth potential. It provides important insights into a company's ability to generate revenue from its core business activities and can help investors make informed decisions about their investments.
Here are a few examples of operating revenue for different types of businesses:
Retail store: A clothing store that generates $100,000 in revenue from selling clothes, after deducting the cost of goods sold and operating expenses such as rent, utilities, and labor, has an operating revenue of $100,000.
Service provider: A consulting firm that generates $500,000 in revenue from providing consulting services to clients, after deducting the cost of labor and operating expenses such as rent, utilities, and supplies, has an operating revenue of $500,000.
Software company: A software company that generates $1 million in revenue from selling its software licenses, after deducting the cost of developing and supporting the software and operating expenses such as rent, utilities, and salaries, has an operating revenue of $1 million.
Restaurant: A restaurant that generates $500,000 in revenue from selling food and beverages, after deducting the cost of food and labor and operating expenses such as rent, utilities, and supplies, has an operating revenue of $500,000.
Technology company: A tech company that generates $10 million in revenue from selling its hardware products, after deducting the cost of manufacturing and supporting the products and operating expenses such as rent, utilities, and salaries, has an operating revenue of $10 million.
These examples demonstrate how operating revenue is calculated by subtracting the cost of goods sold and operating expenses from total revenue to arrive at the amount of revenue generated by a company's core business activities. Operating revenue is an important metric for evaluating a company's profitability and growth potential, and can help investors make informed decisions about their investments.
Comments