Start with revenue or net sales
Subtract cost of goods sold to get gross profit
Subtract operating expenses such as selling, general, and administrative expenses
Subtract depreciation and amortization if included in operating expenses
Exclude interest expense
Exclude interest income
Exclude taxes
Exclude gains or losses from investments
Exclude one-time non-operating items
The result is operating income
Use the formula: Operating Income = Revenue – Cost of Goods Sold – Operating Expenses