What it is
Operating income is what the business earned from its main activities, before interest and taxes get involved. The acronym EBIT (Earnings Before Interest and Taxes) means the same thing.
Why people watch it
EBIT strips out two things that aren't really about how well the business operates:
- Interest — that's a financing decision (how much debt the company took on).
- Taxes — that's a government decision (which jurisdiction, which year).
What's left is a cleaner view of how the business itself performs.