Operating margin
Principles of Finance glossary · Financial Statements, Markets & Working Capital
Definition
Operating income divided by revenue; the percentage of revenue retained after operating costs.
Operating margin in plain English
Operating margin tells you how many cents of profit a company keeps from each dollar of sales after paying the everyday costs of running the business (making the product, paying staff, rent, and so on) — but before interest and taxes. You get it by dividing operating income by revenue: if a store sells $100 of goods and $18 is left as operating profit, its operating margin is 18%. It's a quick health check on how efficiently a company turns sales into profit — a higher margin usually means a stronger, better-run business.
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Practice Operating margin
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