Definition
Operating margin measures profitability from core operations after all operating costs. It shows management's efficiency in controlling overhead beyond production costs. Higher operating margins indicate operational excellence and scalability.
Formula
Operating Margin = Operating Income / Revenue × 100%
Example
With $100M revenue and $20M operating income, operating margin is 20%. This means $0.20 of every sales dollar becomes operating profit before interest and taxes.
FAQ
What is Operating Margin?
Operating income as a percentage of revenue.
How do you calculate Operating Margin?
A common formula for Operating Margin is: Operating Margin = Operating Income / Revenue × 100%
Why is Operating Margin important?
Operating Margin helps investors evaluate profitability and make more informed decisions.