Operating Margin
Also called: operating profit margin
What is Operating Margin?
Operating margin is operating profit as a percentage of revenue — what is left after both direct costs and running costs, but before interest and tax. It measures how efficiently the core business converts sales into profit.
Why Operating Margin matters
Operating margin is the cleanest single measure of operational health, because it captures both pricing and cost control while ignoring how the business is financed.
Operating Margin formula
Operating margin % = Operating profit ÷ Revenue × 100
Operating profit is gross profit minus operating expenses.
How Operating Margin works in practice
Track it monthly on the same definition. A gross margin that holds steady while operating margin slides points at overhead growth rather than at pricing or purchasing.
Frequently asked questions
Net margin also deducts interest and tax, so it reflects financing and tax position as well as operations.