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What amount of earnings is directly related to day-to-day primary business operations?

a. Gross profit
b. Operating income
c. Net income
d. Retained earnings

1 Answer

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Final answer:

Operating income is the earnings amount directly tied to a company's day-to-day business operations. It reflects the profits made from the primary business activities before subtraction of interest and taxes.

Step-by-step explanation:

The amount of earnings directly related to day-to-day primary business operations is Operating income. Operating income is derived from the company's core business activities and does not include income from secondary sources, like investments or one-time sales. In the basic profit equation, Profit = Total Revenue - Total Cost, operating income would be calculated after costs of goods sold and operating expenses are deducted from total revenue, but before taxes and interest are taken into account.

It is important to note that profits and earnings distributed among employees can often lead to improved productivity, as employees directly benefit from the success of the business. Operating income is a clear indicator of a company's profitability and operational efficiency.

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