Finance Definition
Operating Margin
📈 Investing
intermediate

Quick Definition

Operating margin is a profitability ratio that measures the percentage of profit a company makes from its operations, relative to its revenue.

Formula

Operating Margin = (Operating Income / Revenue) * 100

Examples

  • 1A company with $200,000 in operating income and $1,000,000 in revenue has an operating margin of 20%.
  • 2If a business increases its revenue while keeping operating costs constant, its operating margin will improve.
  • 3A decline in operating margin over time might indicate rising costs or falling prices, affecting profitability.

Tags

profitabilityfinancial-ratiosbusiness-performancecost-managementrevenue
Related Terms
Other terms you might find helpful
Gross Margin
Gross margin is a financial metric that measures the percentage of total sales revenue that exceeds the cost of goods sold (COGS). It indicates how efficiently a company uses labor and supplies in the production process.
Net Profit Margin
Net Profit Margin is a financial ratio that measures the percentage of net income derived from total revenues, indicating how much of each dollar earned by the company is translated into profits.
Quick Info
Category:Investing
Difficulty:intermediate
Last Updated:6/20/2025