Why is operating income preferred over net income for assessing profitability?

Operating income is preferred over net income for assessing profitability primarily because it focuses exclusively on core operational performance. This measure directly reflects how well a company generates profit from its regular business activities, without the influence of non-operational factors such as taxes, interest expense, or extraordinary items.

When analyzing a company's ability to generate profits from its day-to-day operations, operating income provides a clearer picture of the operational efficiency and effectiveness of the business. This is essential for stakeholders who are interested in understanding the sustainability and performance of the core business model. By isolating the profits generated solely from operations, investors and analysts can make more informed decisions about the company's health, future potential, and operational strategies.

This focus on core operations is crucial, especially in industries where non-operating revenues or expenses can significantly skew the results. Hence, operating income offers a more actionable insight into profitability that is directly tied to the business’s primary activities.