Operating Margin
Short answer
Operating Margin is Operating Income divided by Revenue. It captures profitability from core operations only — before interest expense (capital structure) and taxes (jurisdiction). It is a clean measure of operational efficiency that allows cross-business comparison.
Formula
Operating Margin (%) = Operating Income / Revenue × 100
Take revenue, subtract COGS and operating expenses, divide the result by revenue, multiply by 100.
Why it matters
Operating margin shows whether the day-to-day business is profitable before interest and taxes muddy the picture. Two companies with identical gross margins can have wildly different operating margins depending on how lean their overhead is.
Benchmarks
People also ask
Common questions about Operating Margin
What is Operating Margin?+
Operating margin is the percentage of revenue left after both direct costs (COGS) and operating expenses like rent, salaries, and overhead.
How is Operating Margin calculated?+
Take revenue, subtract COGS and operating expenses, divide the result by revenue, multiply by 100.
What is a good Operating Margin?+
A healthy operating margin is typically around ≥ 15% — strong / scalable. Specific targets vary by industry and stage; check our benchmarks above for your sector.
Why does Operating Margin matter?+
Operating margin shows whether the day-to-day business is profitable before interest and taxes muddy the picture. Two companies with identical gross margins can have wildly different operating margins depending on how lean their overhead is..
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