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Definition of Operating Income
A measure of results produced by the core operations of a firm. It is common
The net income of a business, less the impact of any financial activity,
Debt financing amplifies the effects of changes in operating income on the returns to stockholders.
Cash not required for operations or for reinvestment. Often defined as earnings before
The ratio of net operating income to net sales.
Risk in firm’s operating income.
income that has been earned but not yet received. For instance, if you have a non-registered Guaranteed Investment Certificate (GIC), Mutual Fund or Segregated Equity Fund, growth accrues annually or semi-annually and is taxable annually even though the gain is only paid at maturity of your investment.
Cumulative gains or losses reported in shareholders'
Operations Reported income from continuing operations
For investment companies, the management fee and "other expenses,"
Pretax income reported on the income statement.
This equals the cash inflow from sales during the period minus the cash
With some exceptions, the cash effects of transactions
Adjusted cash flow provided by continuing operations
income statement that presents items as a percentage of revenues.
That portion of the total income tax provision that is based on
That portion of the total income tax provision that is the result
degree of operating leverage
a factor that indicates how a percentage change in sales, from the existing or current
degree of operating leverage (DOL)
Percentage change in profits given a 1 percent change in sales.
income less income tax.
income that a company receives in the form of dividends on stock in other companies that it holds.
Earned income is generally an individual's salary or wages from employment. It also includes some taxable benefits. Earned income also includes business income if the individual is self-employed. Earned income is used as the basis for calculating RRSP maximum contribution limits.
earnings before interest and income tax (EBIT)
A measure of profit that
Cash flow plus change in present value.
Employee Retirement Income Security Act of 1974 (ERISA)
A federal Act that sets minimum operational and funding standards for employee benefit
Also called a busted convertible, a convertible security that is trading like a straight
Assets that pay a fixed-dollar amount, such as bonds and preferred stock.
The market for trading bonds and preferred stock.
A security that pays a specified cash flow over a
Net earnings after all expenses for an accounting period are subtracted from all
One who receives income from a trust.
A bond on which the payment of interest is contingent on sufficient earnings. These bonds are
Income from Continuing Operations
After-tax net income before discontinued operations,
A mutual fund providing for liberal current income from investments.
Mutual funds that seek regular income. This type of fund invests primarily in government, corporate and other types of bonds, debt securities, and other income producing securities and in certain circumstances can also hold common and preferred shares.
A form of earnings management designed to remove peaks and valleys
This is a tax planning strategy of arranging for income to be transferred to family members who are in lower tax brackets than the one earning the income, thus reducing taxes. Even though attribution rules limit income splitting, there are still a number of legitimate ways to do so, such as through the use of spousal RRSPs.
An accounting statement that summarizes information about a company in the following format:
One of the basic financial statements; it lists the revenue and expense accounts of the company.
Financial statement that summarizes sales revenue
A financial report that summarizes a company’s revenue, cost of
Financial statement that shows the revenues, expenses, and net income of a firm over a period of time.
Income statement (statement of operations)
A statement showing the revenues, expenses, and income (the
A financial statement that displays a breakdown of total sales and total expenses.
Common stock with a high dividend yield and few profitable investment opportunities.
What the business paid to the IRS.
A government tax on the income earned by an individual or corporation.
Income Tax Expense
See income tax provision.
Income Tax Provision
The expense deduction from pretax book income reported on the
A policy designed to lower inflation without reducing aggregate demand. Wage/price controls are an example.
income that a company receives in the form of interest, usually as the result of keeping money in interest-bearing accounts at financial institutions and the lending of money to other companies.
The revenue from a portfolio of invested assets.
Life Income Fund
Commonly known as a LIF, this is one of the options available to locked in Registered Pension Plan (RPP) holders for income payout as opposed to Registered Retirement Savings Plan (RRSP) holders choice of payout through Registered Retirement income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80.
Monthly income preferred security (MIP)
Preferred stock issued by a subsidiary located in a tax haven.
GDP with some adjustments to remove items that do not make it into anyone's hands as income, such as indirect taxes and depreciation. Loosely speaking, it is interpreted as being equal to GDP.
National Income and Product Accounts
The national accounting system that records economic activity such as GDP and related measures.
The company's total earnings, reflecting revenues adjusted for costs of doing business,
The profit a company makes after cost of goods sold, expenses, and taxes are subtracted from net sales.
The last line of the income Statement; it represents the amount that the company earned during a specified period.
The excess of revenues over expenses, including the impact of income taxes.
net income (also called the bottom line, earnings, net earnings, and net
Net operating losses
Losses that a firm can take advantage of to reduce taxes.
Includes all the sales and expense activities of a business.
a budget expressed in both units and dollars
Operating cash flow
Earnings before depreciation minus taxes. It measures the cash generated from
operating cash flow
See cash flow from operating activities.
Operating Cash Flow
income available after the payment of taxes, plus the value of the
The average time intervening between the acquisition of materials or services and the final
A term frequently used to describe earnings after the removal of the
Any expense associated with the general, sales, and administrative
The total amount that was spent to run a company this year.
The amount of money the company must spend on overhead, distribution, taxes, underwriting the risk and servicing the policy. It is a factor in calculating premium rates.
Degree to which exchange rate changes, in combination with price changes, will alter a
Short-term, cancelable lease. A type of lease in which the period of contract is less than the
The rental of an asset from a lessor, but not under terms that would
One where the risks and benefits, as well as ownership, stays with the lessor.
Fixed operating costs, so-called because they accentuate variations in profits.
A relatively small percent increase or decrease in
the proportionate relationship between
Degree to which costs are fixed.
Operating Line of Credit
A bank's commitment to make loans to a particular borrower up to a specified maximum for a specified period, usually one year.
A loan advanced under an operating line of credit.
The profit made by the business for an accounting period, equal to gross profit less selling, finance, administration etc. expenses, but before deducting interest or taxation.
See earnings before interest and income tax (EBIT).
Operating profit margin
The ratio of operating margin to net sales.
The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is
Permanent Income Hypothesis
Theory that individuals base current consumption spending on their perceived long-run average income rather than their current income.
RATIO OF NET INCOME TO NET SALES
A ratio that shows how much net income (profit) a company made on each dollar of net sales. Here’s the formula:
RATIO OF NET SALES TO NET INCOME
A ratio that shows how much a company had to collect in net sales to make a dollar of profit. Figure it this way:
income expressed in base-year dollars, calculated by dividing nominal income by a price index.
Registered Retirement Income Fund (Canada)
Commonly referred to as a RRIF, this is one of the options available to RRSP holders to convert their tax sheltered savings into taxable income.
the profit earned by a responsibility center that exceeds an amount "charged" for funds committed to that center
Also called economic value added. Profit minus cost of capital employed.
Residual income (RI)
The profit remaining after deducting from profit a notional cost of capital on the investment in a business or division of a business.
Short-run operating activities
Events and decisions concerning the short-term finance of a firm, such as
Also called margin income, the difference between income and cost. For a depository
current compensation that is taxed at a future date
current compensation that is never taxed
Tax-Related Incomes Policy (TIP)
Tax incentives for labor and business to induce them to conform to wage/price guidelines.
Gross income less a set of deductions.
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