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Interest income

What a company earns on its cash and short-term investments; a real profit contributor for cash-rich firms when rates are high.

Interest income is non-operating. It tells you nothing about whether the product sells, which is why analysts strip it out when judging the core business and why operating-income sits above it.

For a company with a large cash pile, the swing can be big enough to dominate a headline eps move. Treating an interest-driven beat as operational strength is a common mistake in a rate-cutting or rate-hiking cycle.

Example: Northwind holds $610M of cash and short-term securities. At 5% that is $30M of interest income, roughly 25% of operating income. If rates fall to 2%, $18M of pre-tax profit disappears without any change in tool sales.

Related: interest-expense, net-income

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