Metric
Operating Margin
Profit left after paying for the full operation, before interest and taxes.
Formula
Operating Income ÷ Revenue
Definition
Operating margin captures what a company earns from its core business after all operating costs (salaries, R&D, marketing, rent) but before financing decisions or taxes.
Why it matters
It reflects how well management runs the business day-to-day. Consistent, expanding operating margins suggest scale, discipline, and pricing power.
Building blocks
- Operating Income
- Profit from core operations, before interest and taxes.
- Revenue
- Total money earned from selling products or services.
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