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What is the formula for Operating Margin?

Updated: 9/11/2023
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Lpineda

Lvl 1
12y ago

Best Answer

Operating Margin is a measurement of what proportion of a company's revenue is left over, before taxes and other indirect costs are incurred, after paying for variable costs of production like wages, raw materials etc.

A good operating margin is required for a company to be able to pay for its fixed costs like interest on its debt. A higher operating margin means that the company has less financial risk.

Formula:

Operating Margin = (Operating Income / Revenue)

Operating income is the difference between operating revenues and operating expenses

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Q: What is the formula for Operating Margin?
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