Operating Profit Margin

The Operating Profit Margin is a measure of how much income a company has left after paying its Operating Costs such as Rent and Salaries. It is calculated as Operating Profit divided by Revenue.

Formula of Operating Profit Margin

Interpretation of Operating Margin

A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt.

A company's operating margin is most meaningfully compared against other companies in its own industry, as they will likely share similar cost structures. It is a good way to compare the quality of a company's activity to its competitors, specifically the company's pricing strategy and operating efficiency.