What is operating margin mean?

The operating margin is an important measure of a company's overall profitability from operations. It is the ratio of operating profits to revenues for a company or business segment.

What is the definition of operating margin?

The operating margin measures how much profit a company makes on a dollar of sales after paying for variable costs of production, such as wages and raw materials, but before paying interest or tax. It is calculated by dividing a company’s operating income by its net sales.

Which is better higher or lower operating margin?

It is expressed on a per-sale basis after accounting for variable costs but before paying any interest or taxes (EBIT). Higher margins are considered better than lower margins, and can be compared between similar competitors but not across different industries.