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.
\( \text{Operating Margin}=\frac{\text{Operating Profit}}{\text{Total Revenue}} \)
\( \text{Operating Margin}=\frac{\text{Gross Profit} - \text{Operating Expenses}}{\text{Total Revenue}} \)
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.