Which of the following would be included in operating income?
a. Interest income for a manufacturing firm.
b. Rent income for a leasing subsidiary.
c. Gain from sale of marketable securities for a retailer.
d. Dividend income for a service firm.
e. None of the answers are correct.
Operating income is a metric that shows the amount of profit earned by a company from its primary business operations. It does not take into account the effects of activities other than normal for a particular business, for example, financial activities (in case of non-financial corporations) or taxes.
Answer and Explanation:
The correct answer is b. Rent income for a leasing subsidiary.
The operating income refers to an income related with normal operating activities. These activities may vary from industry to industry, but the general rule is that they should be related with the sale of goods and services by the company. Renting goods is definitely a normal operating activity for a leasing company, so the answer b is correct.
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
from Accounting 101: Financial AccountingChapter 2 / Lesson 2