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Simple English definitions for legal terms
operating earnings
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A quick definition of operating earnings:
Operating earnings refer to the money a business makes from its operations, such as selling products or providing services. It does not include other sources of income, like investments. This term is sometimes used to show a company's financial performance, but it can be misleading because it doesn't account for all expenses. It's important to look at a company's overall earnings, including all sources of income and expenses, to get a complete picture of its financial health.A more thorough explanation:
Definition: Operating earnings refer to a company's income that is earned from its regular business operations, excluding any one-time or special items. It is calculated by subtracting operating expenses from revenue.
Example: If a company earns $1 million in revenue from selling its products and incurs $800,000 in operating expenses such as salaries, rent, and utilities, its operating earnings would be $200,000.
This metric is important for investors and analysts as it provides a clearer picture of a company's financial health and performance, without the impact of one-time events or non-operating activities. It helps in assessing the company's ability to generate profits from its core business operations.