Operating margin is operating income as a percentage of revenue, showing profitability after COGS and operating expenses but before interest and taxes.
Operating margin measures how much operating income (also called operating profit) a company earns per dollar of revenue after COGS and operating expenses, but before interest and taxes.
Formula
Operating Margin = Operating Income ÷ Revenue
Example
If Operating Income is $180 and Revenue is $1,000, Operating Margin = 18%.
Why it matters
Operating margin focuses on core business efficiency, excluding capital structure and tax effects. Improvements can come from scale, pricing, productivity, or operating cost discipline.
