What is Operating Margin?
Profitability from core operations before interest and tax.
How to calculate it
Calculate Operating Margin as: Operating income / Revenue × 100. Pull the inputs from your connected data and track the trend over time in your dashboard.
Examples
Example 1
$1M revenue and $150k operating income -> 15% operating margin, isolating core operations.
Example 2
Operating income of $225k on $1.5M revenue -> 15% operating margin, up from 11% a year earlier as fixed costs spread over more revenue.
Why it matters
Operating margin is profitability from core operations before interest and tax and isolates operational efficiency from financing and tax decisions. It is a cleaner gauge of how well the underlying business runs than net margin. Watching its trend reveals whether the business is gaining or losing operating leverage as it scales.
Benchmark context
Varies widely by industry; track the trend against peers, with an improving margin as revenue grows signaling healthy operating leverage.
Common pitfalls
Mixing operating and non-operating items.
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