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class="mw-page-title-main">Operating margin</span></h1> <div id="p-lang-btn" class="vector-dropdown mw-portlet mw-portlet-lang" > <input type="checkbox" id="p-lang-btn-checkbox" role="button" aria-haspopup="true" data-event-name="ui.dropdown-p-lang-btn" class="vector-dropdown-checkbox mw-interlanguage-selector" aria-label="Go to an article in another language. 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mw-list-item"><a href="https://az.wikipedia.org/wiki/%C6%8Fm%C9%99liyyat_marjas%C4%B1" title="Əməliyyat marjası – Azerbaijani" lang="az" hreflang="az" data-title="Əməliyyat marjası" data-language-autonym="Azərbaycanca" data-language-local-name="Azerbaijani" class="interlanguage-link-target"><span>Azərbaycanca</span></a></li><li class="interlanguage-link interwiki-da mw-list-item"><a href="https://da.wikipedia.org/wiki/Overskudsgrad" title="Overskudsgrad – Danish" lang="da" hreflang="da" data-title="Overskudsgrad" data-language-autonym="Dansk" data-language-local-name="Danish" class="interlanguage-link-target"><span>Dansk</span></a></li><li class="interlanguage-link interwiki-de badge-Q70894304 mw-list-item" title=""><a href="https://de.wikipedia.org/wiki/Umsatzrendite" title="Umsatzrendite – German" lang="de" hreflang="de" data-title="Umsatzrendite" data-language-autonym="Deutsch" data-language-local-name="German" class="interlanguage-link-target"><span>Deutsch</span></a></li><li class="interlanguage-link interwiki-es mw-list-item"><a href="https://es.wikipedia.org/wiki/Margen_operativo" title="Margen operativo – Spanish" lang="es" hreflang="es" data-title="Margen operativo" data-language-autonym="Español" data-language-local-name="Spanish" class="interlanguage-link-target"><span>Español</span></a></li><li class="interlanguage-link interwiki-eu mw-list-item"><a href="https://eu.wikipedia.org/wiki/Mozkin-marjina" title="Mozkin-marjina – Basque" lang="eu" hreflang="eu" data-title="Mozkin-marjina" data-language-autonym="Euskara" data-language-local-name="Basque" class="interlanguage-link-target"><span>Euskara</span></a></li><li class="interlanguage-link interwiki-fa mw-list-item"><a href="https://fa.wikipedia.org/wiki/%D8%AD%D8%A7%D8%B4%DB%8C%D9%87_%D8%B3%D9%88%D8%AF_%D8%B9%D9%85%D9%84%DB%8C%D8%A7%D8%AA%DB%8C" title="حاشیه سود عملیاتی – Persian" lang="fa" hreflang="fa" data-title="حاشیه سود عملیاتی" data-language-autonym="فارسی" data-language-local-name="Persian" class="interlanguage-link-target"><span>فارسی</span></a></li><li class="interlanguage-link interwiki-fr mw-list-item"><a href="https://fr.wikipedia.org/wiki/Marge_op%C3%A9rationnelle" title="Marge opérationnelle – French" lang="fr" hreflang="fr" data-title="Marge opérationnelle" data-language-autonym="Français" data-language-local-name="French" class="interlanguage-link-target"><span>Français</span></a></li><li class="interlanguage-link interwiki-it mw-list-item"><a href="https://it.wikipedia.org/wiki/Return_on_sales" title="Return on sales – Italian" lang="it" hreflang="it" data-title="Return on sales" data-language-autonym="Italiano" data-language-local-name="Italian" class="interlanguage-link-target"><span>Italiano</span></a></li><li class="interlanguage-link interwiki-he mw-list-item"><a href="https://he.wikipedia.org/wiki/%D7%9E%D7%A8%D7%95%D7%95%D7%97_%D7%AA%D7%A4%D7%A2%D7%95%D7%9C%D7%99" title="מרווח תפעולי – Hebrew" lang="he" hreflang="he" data-title="מרווח תפעולי" data-language-autonym="עברית" data-language-local-name="Hebrew" class="interlanguage-link-target"><span>עברית</span></a></li><li class="interlanguage-link interwiki-lv mw-list-item"><a href="https://lv.wikipedia.org/wiki/Bruto_pe%C4%BC%C5%86as_mar%C5%BEa" title="Bruto peļņas marža – Latvian" lang="lv" hreflang="lv" data-title="Bruto peļņas marža" data-language-autonym="Latviešu" data-language-local-name="Latvian" class="interlanguage-link-target"><span>Latviešu</span></a></li><li class="interlanguage-link interwiki-no mw-list-item"><a href="https://no.wikipedia.org/wiki/Driftsmargin" title="Driftsmargin – Norwegian Bokmål" lang="nb" hreflang="nb" data-title="Driftsmargin" data-language-autonym="Norsk bokmål" data-language-local-name="Norwegian Bokmål" class="interlanguage-link-target"><span>Norsk bokmål</span></a></li><li class="interlanguage-link interwiki-pl mw-list-item"><a href="https://pl.wikipedia.org/wiki/Wska%C5%BAnik_rentowno%C5%9Bci_sprzeda%C5%BCy" title="Wskaźnik rentowności sprzedaży – Polish" lang="pl" hreflang="pl" data-title="Wskaźnik rentowności sprzedaży" data-language-autonym="Polski" data-language-local-name="Polish" class="interlanguage-link-target"><span>Polski</span></a></li><li class="interlanguage-link interwiki-ru mw-list-item"><a href="https://ru.wikipedia.org/wiki/%D0%9E%D0%BF%D0%B5%D1%80%D0%B0%D1%86%D0%B8%D0%BE%D0%BD%D0%BD%D0%B0%D1%8F_%D0%BC%D0%B0%D1%80%D0%B6%D0%B0" title="Операционная маржа – Russian" lang="ru" hreflang="ru" data-title="Операционная маржа" data-language-autonym="Русский" data-language-local-name="Russian" class="interlanguage-link-target"><span>Русский</span></a></li><li class="interlanguage-link interwiki-sv mw-list-item"><a href="https://sv.wikipedia.org/wiki/R%C3%B6relsemarginal" title="Rörelsemarginal – Swedish" lang="sv" hreflang="sv" data-title="Rörelsemarginal" data-language-autonym="Svenska" data-language-local-name="Swedish" class="interlanguage-link-target"><span>Svenska</span></a></li><li class="interlanguage-link interwiki-th mw-list-item"><a href="https://th.wikipedia.org/wiki/%E0%B8%AD%E0%B8%B1%E0%B8%95%E0%B8%A3%E0%B8%B2%E0%B8%81%E0%B8%B3%E0%B9%84%E0%B8%A3%E0%B8%88%E0%B8%B2%E0%B8%81%E0%B8%81%E0%B8%B2%E0%B8%A3%E0%B8%94%E0%B8%B3%E0%B9%80%E0%B8%99%E0%B8%B4%E0%B8%99%E0%B8%87%E0%B8%B2%E0%B8%99" title="อัตรากำไรจากการดำเนินงาน – Thai" lang="th" hreflang="th" data-title="อัตรากำไรจากการดำเนินงาน" data-language-autonym="ไทย" data-language-local-name="Thai" class="interlanguage-link-target"><span>ไทย</span></a></li><li class="interlanguage-link interwiki-vi mw-list-item"><a href="https://vi.wikipedia.org/wiki/T%E1%BB%B7_su%E1%BA%A5t_l%E1%BB%A3i_nhu%E1%BA%ADn_tr%C3%AAn_doanh_thu" title="Tỷ suất lợi nhuận trên doanh thu – Vietnamese" lang="vi" hreflang="vi" data-title="Tỷ suất lợi nhuận trên doanh thu" data-language-autonym="Tiếng Việt" data-language-local-name="Vietnamese" class="interlanguage-link-target"><span>Tiếng Việt</span></a></li> </ul> <div class="after-portlet 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title="Return on sales">Return on sales</a>)</span></div></div> <div id="mw-content-text" class="mw-body-content"><div class="mw-content-ltr mw-parser-output" lang="en" dir="ltr"><div class="shortdescription nomobile noexcerpt noprint searchaux" style="display:none">Ratio of operating income to net sales</div> <p>In <a href="/wiki/Business" title="Business">business</a>, <b>operating margin</b>—also known as <b>operating income margin</b>, <b>operating profit margin</b>, <b>EBIT margin</b> and <b>return on sales</b> (<b>ROS</b>)—is the ratio of <a href="/wiki/Operating_income" class="mw-redirect" title="Operating income">operating income</a> ("operating profit" in the <a href="/wiki/United_Kingdom" title="United Kingdom">UK</a>) to <a href="/wiki/Revenue" title="Revenue">net sales</a>, usually expressed in percent. </p> <dl><dd><span class="mwe-math-element"><span class="mwe-math-mathml-inline mwe-math-mathml-a11y" style="display: none;"><math xmlns="http://www.w3.org/1998/Math/MathML" alttext="{\displaystyle {\text{Operating margin}}={\frac {\text{Operating income}}{\text{Revenue}}}.}"> <semantics> <mrow class="MJX-TeXAtom-ORD"> <mstyle displaystyle="true" scriptlevel="0"> <mrow class="MJX-TeXAtom-ORD"> <mtext>Operating margin</mtext> </mrow> <mo>=</mo> <mrow class="MJX-TeXAtom-ORD"> <mfrac> <mtext>Operating income</mtext> <mtext>Revenue</mtext> </mfrac> </mrow> <mo>.</mo> </mstyle> </mrow> <annotation encoding="application/x-tex">{\displaystyle {\text{Operating margin}}={\frac {\text{Operating income}}{\text{Revenue}}}.}</annotation> </semantics> </math></span><img src="https://wikimedia.org/api/rest_v1/media/math/render/svg/0307f56c98c3dfee85c780d97897ea1b8ebc5aa3" class="mwe-math-fallback-image-inline mw-invert skin-invert" aria-hidden="true" style="vertical-align: -2.005ex; width:40.384ex; height:5.509ex;" alt="{\displaystyle {\text{Operating margin}}={\frac {\text{Operating income}}{\text{Revenue}}}.}"></span></dd></dl> <p><i><a href="/wiki/Net_profit" class="mw-redirect" title="Net profit">Net profit</a></i> measures the <a href="/wiki/Profit_(accounting)" title="Profit (accounting)">profitability</a> of ventures after accounting for all costs.<sup id="cite_ref-Marketing_Metrics_1-0" class="reference"><a href="#cite_note-Marketing_Metrics-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> </p><p><i>Return on sales (ROS)</i> is net profit as a percentage of sales <a href="/wiki/Revenue" title="Revenue">revenue</a>. ROS is an indicator of profitability and is often used to compare the profitability of companies and industries of differing sizes. Significantly, ROS does not account for the <a href="/wiki/Capital_(economics)" title="Capital (economics)">capital</a> (<a href="/wiki/Investment" title="Investment">investment</a>) used to generate the profit. In a survey of nearly 200 senior marketing managers, 69 percent responded that they found the "return on sales" metric very useful.<sup id="cite_ref-Marketing_Metrics_1-1" class="reference"><a href="#cite_note-Marketing_Metrics-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> </p><p>Unlike <a href="/wiki/EBITDA" class="mw-redirect" title="EBITDA">Earnings before interest, taxes, depreciation, and amortization (EBITDA)</a> margin, operating margin takes into account depreciation and amortization expenses. <sup id="cite_ref-Marketing_Metrics_1-2" class="reference"><a href="#cite_note-Marketing_Metrics-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> {NNP = GNP- depreciation /GNP = GDP- depreciation </p> <meta property="mw:PageProp/toc" /> <div class="mw-heading mw-heading2"><h2 id="Purpose">Purpose</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Operating_margin&action=edit&section=1" title="Edit section: Purpose"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>These financial metrics measure levels and rates of <a href="/wiki/Profit_(accounting)" title="Profit (accounting)">profitability</a>. Probably the most common way to determine the successfulness of a company is to look at the <a href="/wiki/Net_profit" class="mw-redirect" title="Net profit">net profits</a> of the business. Companies are collections of projects and markets, individual areas can be judged on how successful they are at adding to the corporate net profit. Not all projects are of equal size, however, and one way to adjust for size is to divide the profit by sales <a href="/wiki/Revenue" title="Revenue">revenue</a>. The resulting ratio is return on sales (ROS), the percentage of sales revenue that gets 'returned' to the company as net profits after all the related costs of the activity are deducted.<sup id="cite_ref-Marketing_Metrics_1-3" class="reference"><a href="#cite_note-Marketing_Metrics-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading2"><h2 id="Construction">Construction</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Operating_margin&action=edit&section=2" title="Edit section: Construction"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Net profit measures the fundamental profitability of the business. It is the revenues of the activity less the costs of the activity. The main complication is in more complex businesses when overhead needs to be allocated across divisions of the company. Almost by definition, overheads are costs that cannot be directly tied to any specific product or division. The classic example would be the cost of headquarters staff.<sup id="cite_ref-Marketing_Metrics_1-4" class="reference"><a href="#cite_note-Marketing_Metrics-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> </p><p><i><b>Net</b> <b>profit</b>: To calculate net profit for a unit (such as a company or division), subtract all costs, including a fair share of total corporate overheads, from the gross revenues.<sup id="cite_ref-Marketing_Metrics_1-5" class="reference"><a href="#cite_note-Marketing_Metrics-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup></i> <span class="mwe-math-element"><span class="mwe-math-mathml-display mwe-math-mathml-a11y" style="display: none;"><math display="block" xmlns="http://www.w3.org/1998/Math/MathML" alttext="{\displaystyle {\text{Net profit}}\ (\$)={\text{Sales revenue}}\ (\$)-{\text{Total costs}}\ (\$)}"> <semantics> <mrow class="MJX-TeXAtom-ORD"> <mstyle displaystyle="true" scriptlevel="0"> <mrow class="MJX-TeXAtom-ORD"> <mtext>Net profit</mtext> </mrow> <mtext> </mtext> <mo stretchy="false">(</mo> <mi mathvariant="normal">$</mi> <mo stretchy="false">)</mo> <mo>=</mo> <mrow class="MJX-TeXAtom-ORD"> <mtext>Sales revenue</mtext> </mrow> <mtext> </mtext> <mo stretchy="false">(</mo> <mi mathvariant="normal">$</mi> <mo stretchy="false">)</mo> <mo>−</mo> <mrow class="MJX-TeXAtom-ORD"> <mtext>Total costs</mtext> </mrow> <mtext> </mtext> <mo stretchy="false">(</mo> <mi mathvariant="normal">$</mi> <mo stretchy="false">)</mo> </mstyle> </mrow> <annotation encoding="application/x-tex">{\displaystyle {\text{Net profit}}\ (\$)={\text{Sales revenue}}\ (\$)-{\text{Total costs}}\ (\$)}</annotation> </semantics> </math></span><img src="https://wikimedia.org/api/rest_v1/media/math/render/svg/29d39d7d1ed6e757d2ecdffa90d62372d34a37af" class="mwe-math-fallback-image-display mw-invert skin-invert" aria-hidden="true" style="vertical-align: -0.838ex; width:51.006ex; height:2.843ex;" alt="{\displaystyle {\text{Net profit}}\ (\$)={\text{Sales revenue}}\ (\$)-{\text{Total costs}}\ (\$)}"></span> </p><p><i><b>Return on sales (ROS):</b> Net profit as a percentage of sales revenue</i>.<sup id="cite_ref-Marketing_Metrics_1-6" class="reference"><a href="#cite_note-Marketing_Metrics-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> <span class="mwe-math-element"><span class="mwe-math-mathml-display mwe-math-mathml-a11y" style="display: none;"><math display="block" xmlns="http://www.w3.org/1998/Math/MathML" alttext="{\displaystyle {\text{Return on sales}}\ (\%)={\frac {{\text{Net profit}}\ (\$)}{{\text{Sales revenue}}\ (\$)}}}"> <semantics> <mrow class="MJX-TeXAtom-ORD"> <mstyle displaystyle="true" scriptlevel="0"> <mrow class="MJX-TeXAtom-ORD"> <mtext>Return on sales</mtext> </mrow> <mtext> </mtext> <mo stretchy="false">(</mo> <mi mathvariant="normal">%</mi> <mo stretchy="false">)</mo> <mo>=</mo> <mrow class="MJX-TeXAtom-ORD"> <mfrac> <mrow> <mrow class="MJX-TeXAtom-ORD"> <mtext>Net profit</mtext> </mrow> <mtext> </mtext> <mo stretchy="false">(</mo> <mi mathvariant="normal">$</mi> <mo stretchy="false">)</mo> </mrow> <mrow> <mrow class="MJX-TeXAtom-ORD"> <mtext>Sales revenue</mtext> </mrow> <mtext> </mtext> <mo stretchy="false">(</mo> <mi mathvariant="normal">$</mi> <mo stretchy="false">)</mo> </mrow> </mfrac> </mrow> </mstyle> </mrow> <annotation encoding="application/x-tex">{\displaystyle {\text{Return on sales}}\ (\%)={\frac {{\text{Net profit}}\ (\$)}{{\text{Sales revenue}}\ (\$)}}}</annotation> </semantics> </math></span><img src="https://wikimedia.org/api/rest_v1/media/math/render/svg/0783402e3acba1ed920f991e7b5551c8aec224a8" class="mwe-math-fallback-image-display mw-invert skin-invert" aria-hidden="true" style="vertical-align: -2.671ex; width:40.7ex; height:6.509ex;" alt="{\displaystyle {\text{Return on sales}}\ (\%)={\frac {{\text{Net profit}}\ (\$)}{{\text{Sales revenue}}\ (\$)}}}"></span> </p><p><a href="/wiki/EBITDA" class="mw-redirect" title="EBITDA">Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)</a> is a very popular measure of financial performance. It is used to assess the 'operating' profit of the business. It is a rough way of calculating how much cash the business is generating and is even sometimes called the 'operating cash flow'. It can be useful because it removes factors that change the view of performance depending upon the accounting and financing policies of the business. Supporters argue it reduces management's ability to change the profits they report by their choice of accounting rules and the way they generate financial backing for the company. This metric excludes from consideration expenses related to decisions such as how to finance the business (debt or equity) and over what period they depreciate fixed assets. EBITDA is typically closer to actual cash flow than is <a href="/wiki/NOPAT" class="mw-redirect" title="NOPAT">NOPAT</a>. ... EBITDA can be calculated by adding back the costs of interest, depreciation, and amortization charges and any taxes incurred.<sup id="cite_ref-Marketing_Metrics_1-7" class="reference"><a href="#cite_note-Marketing_Metrics-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> <span class="mwe-math-element"><span class="mwe-math-mathml-display mwe-math-mathml-a11y" style="display: none;"><math display="block" xmlns="http://www.w3.org/1998/Math/MathML" alttext="{\displaystyle {\text{EBITDA}}\ (\$)={\text{Net profit}}\ (\$)+{\text{Interest Payments}}\ (\$)+{\text{Taxes Incurred}}\ (\$)+{\text{Depreciation and Amortization Charges}}\ (\$)}"> <semantics> <mrow class="MJX-TeXAtom-ORD"> <mstyle displaystyle="true" scriptlevel="0"> <mrow class="MJX-TeXAtom-ORD"> <mtext>EBITDA</mtext> </mrow> <mtext> </mtext> <mo stretchy="false">(</mo> <mi mathvariant="normal">$</mi> <mo stretchy="false">)</mo> <mo>=</mo> <mrow class="MJX-TeXAtom-ORD"> <mtext>Net profit</mtext> </mrow> <mtext> </mtext> <mo stretchy="false">(</mo> <mi mathvariant="normal">$</mi> <mo stretchy="false">)</mo> <mo>+</mo> <mrow class="MJX-TeXAtom-ORD"> <mtext>Interest Payments</mtext> </mrow> <mtext> </mtext> <mo stretchy="false">(</mo> <mi mathvariant="normal">$</mi> <mo stretchy="false">)</mo> <mo>+</mo> <mrow class="MJX-TeXAtom-ORD"> <mtext>Taxes Incurred</mtext> </mrow> <mtext> </mtext> <mo stretchy="false">(</mo> <mi mathvariant="normal">$</mi> <mo stretchy="false">)</mo> <mo>+</mo> <mrow class="MJX-TeXAtom-ORD"> <mtext>Depreciation and Amortization Charges</mtext> </mrow> <mtext> </mtext> <mo stretchy="false">(</mo> <mi mathvariant="normal">$</mi> <mo stretchy="false">)</mo> </mstyle> </mrow> <annotation encoding="application/x-tex">{\displaystyle {\text{EBITDA}}\ (\$)={\text{Net profit}}\ (\$)+{\text{Interest Payments}}\ (\$)+{\text{Taxes Incurred}}\ (\$)+{\text{Depreciation and Amortization Charges}}\ (\$)}</annotation> </semantics> </math></span><img src="https://wikimedia.org/api/rest_v1/media/math/render/svg/61fdd7143c7c19d5afaeed2eae7f123b3c336772" class="mwe-math-fallback-image-display mw-invert skin-invert" aria-hidden="true" style="vertical-align: -0.838ex; width:122.253ex; height:2.843ex;" alt="{\displaystyle {\text{EBITDA}}\ (\$)={\text{Net profit}}\ (\$)+{\text{Interest Payments}}\ (\$)+{\text{Taxes Incurred}}\ (\$)+{\text{Depreciation and Amortization Charges}}\ (\$)}"></span><b>Example: The Coca-Cola Company</b><sup id="cite_ref-2" class="reference"><a href="#cite_note-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> </p> <table cellpadding="3" width="350" class="wikitable plainrowheaders" style="text-align:right;"> <caption>Consolidated Statements of Income <style data-mw-deduplicate="TemplateStyles:r886047488">.mw-parser-output .nobold{font-weight:normal}</style><span class="nobold">(In millions)<br />(Relevant figures in italics)</span> </caption> <tbody><tr> <th scope="row"><i>Net Operating Revenues</i> </th> <td><i>$ 20,088</i> </td></tr> <tr> <th scope="row"><a href="/wiki/Gross_Profit" class="mw-redirect" title="Gross Profit">Gross Profit</a> </th> <td>$15,924 </td></tr> <tr> <th scope="row"><i><a href="/wiki/Operating_Income" class="mw-redirect" title="Operating Income">Operating Income</a></i> </th> <td><i>$ 6,318</i> </td></tr> <tr> <th scope="row">Income Before Income Taxes </th> <td>$6,578 </td></tr> <tr> <th scope="row"><a href="/wiki/Net_Income" class="mw-redirect" title="Net Income">Net Income</a> </th> <td>$5,080 </td></tr></tbody></table> <p><span class="mwe-math-element"><span class="mwe-math-mathml-display mwe-math-mathml-a11y" style="display: none;"><math display="block" xmlns="http://www.w3.org/1998/Math/MathML" alttext="{\displaystyle {\text{Operating margin}}={\tfrac {6,318}{20,088}}={\underline {\underline {31.45\%}}}}"> <semantics> <mrow class="MJX-TeXAtom-ORD"> <mstyle displaystyle="true" scriptlevel="0"> <mrow class="MJX-TeXAtom-ORD"> <mtext>Operating margin</mtext> </mrow> <mo>=</mo> <mrow class="MJX-TeXAtom-ORD"> <mstyle displaystyle="false" scriptlevel="0"> <mfrac> <mrow> <mn>6</mn> <mo>,</mo> <mn>318</mn> </mrow> <mrow> <mn>20</mn> <mo>,</mo> <mn>088</mn> </mrow> </mfrac> </mstyle> </mrow> <mo>=</mo> <mrow class="MJX-TeXAtom-ORD"> <munder> <munder> <mrow> <mn>31.45</mn> <mi mathvariant="normal">%</mi> </mrow> <mo>_</mo> </munder> <mo>_</mo> </munder> </mrow> </mstyle> </mrow> <annotation encoding="application/x-tex">{\displaystyle {\text{Operating margin}}={\tfrac {6,318}{20,088}}={\underline {\underline {31.45\%}}}}</annotation> </semantics> </math></span><img src="https://wikimedia.org/api/rest_v1/media/math/render/svg/fd0dcb3b97ef46ddb998d04e94b9f569b1402031" class="mwe-math-fallback-image-display mw-invert skin-invert" aria-hidden="true" style="vertical-align: -1.289ex; margin-bottom: -0.716ex; width:36.744ex; height:4.676ex;" alt="{\displaystyle {\text{Operating margin}}={\tfrac {6,318}{20,088}}={\underline {\underline {31.45\%}}}}"></span> </p><p>It is a measurement of what proportion of a company's revenue is left over, before taxes and other indirect costs (such as rent, bonus, interest, <i>etc</i>.), after paying for variable costs of production as wages, raw materials, <i>etc</i>. A good operating margin is needed for a company to be able to pay for its fixed costs, such as interest on debt. A higher operating margin means that the company has less financial risk. </p><p>Operating margin can be considered total revenue from product sales less all costs before adjustment for taxes, dividends to shareholders, and interest on debt. </p> <div class="mw-heading mw-heading2"><h2 id="See_also">See also</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Operating_margin&action=edit&section=3" title="Edit section: See also"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li><a href="/wiki/Efficiency_ratio" title="Efficiency ratio">Efficiency ratio</a></li> <li><a href="/wiki/Incremental_operating_margin" title="Incremental operating margin">Incremental operating margin</a></li> <li><a href="/wiki/Profit_margin" title="Profit margin">Profit margin</a></li></ul> <div class="mw-heading mw-heading2"><h2 id="References">References</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Operating_margin&action=edit&section=4" title="Edit section: References"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li>Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). <i>Marketing Metrics: The Definitive Guide to Measuring Marketing Performance.</i></li></ul> <div class="mw-references-wrap"><ol class="references"> <li id="cite_note-Marketing_Metrics-1"><span class="mw-cite-backlink">^ <a href="#cite_ref-Marketing_Metrics_1-0"><sup><i><b>a</b></i></sup></a> <a href="#cite_ref-Marketing_Metrics_1-1"><sup><i><b>b</b></i></sup></a> <a href="#cite_ref-Marketing_Metrics_1-2"><sup><i><b>c</b></i></sup></a> <a href="#cite_ref-Marketing_Metrics_1-3"><sup><i><b>d</b></i></sup></a> <a href="#cite_ref-Marketing_Metrics_1-4"><sup><i><b>e</b></i></sup></a> <a href="#cite_ref-Marketing_Metrics_1-5"><sup><i><b>f</b></i></sup></a> <a href="#cite_ref-Marketing_Metrics_1-6"><sup><i><b>g</b></i></sup></a> <a href="#cite_ref-Marketing_Metrics_1-7"><sup><i><b>h</b></i></sup></a></span> <span class="reference-text">Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). <i>Marketing Metrics: The Definitive Guide to Measuring Marketing Performance.</i> Upper Saddle River, New Jersey: Pearson Education, Inc. <style data-mw-deduplicate="TemplateStyles:r1238218222">.mw-parser-output cite.citation{font-style:inherit;word-wrap:break-word}.mw-parser-output .citation q{quotes:"\"""\"""'""'"}.mw-parser-output .citation:target{background-color:rgba(0,127,255,0.133)}.mw-parser-output .id-lock-free.id-lock-free a{background:url("//upload.wikimedia.org/wikipedia/commons/6/65/Lock-green.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-limited.id-lock-limited a,.mw-parser-output .id-lock-registration.id-lock-registration a{background:url("//upload.wikimedia.org/wikipedia/commons/d/d6/Lock-gray-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-subscription.id-lock-subscription a{background:url("//upload.wikimedia.org/wikipedia/commons/a/aa/Lock-red-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .cs1-ws-icon a{background:url("//upload.wikimedia.org/wikipedia/commons/4/4c/Wikisource-logo.svg")right 0.1em center/12px no-repeat}body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-free a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-limited a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-registration a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-subscription a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .cs1-ws-icon a{background-size:contain;padding:0 1em 0 0}.mw-parser-output .cs1-code{color:inherit;background:inherit;border:none;padding:inherit}.mw-parser-output .cs1-hidden-error{display:none;color:var(--color-error,#d33)}.mw-parser-output .cs1-visible-error{color:var(--color-error,#d33)}.mw-parser-output .cs1-maint{display:none;color:#085;margin-left:0.3em}.mw-parser-output .cs1-kern-left{padding-left:0.2em}.mw-parser-output .cs1-kern-right{padding-right:0.2em}.mw-parser-output .citation .mw-selflink{font-weight:inherit}@media screen{.mw-parser-output .cs1-format{font-size:95%}html.skin-theme-clientpref-night .mw-parser-output .cs1-maint{color:#18911f}}@media screen and (prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .cs1-maint{color:#18911f}}</style><a href="/wiki/ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <a href="/wiki/Special:BookSources/0137058292" title="Special:BookSources/0137058292">0137058292</a>. The <a href="/wiki/Marketing_Accountability_Standards_Board_(MASB)" class="mw-redirect" title="Marketing Accountability Standards Board (MASB)">Marketing Accountability Standards Board (MASB)</a> endorses the definitions, purposes, and constructs of classes of measures that appear in <i>Marketing Metrics</i> as part of its ongoing <a rel="nofollow" class="external text" href="http://www.themasb.org/common-language-project/">Common Language: Marketing Activities and Metrics Project</a> <a rel="nofollow" class="external text" href="https://web.archive.org/web/20130212100753/http://www.themasb.org/common-language-project/">Archived</a> 2013-02-12 at the <a href="/wiki/Wayback_Machine" title="Wayback Machine">Wayback Machine</a>.</span> </li> <li id="cite_note-2"><span class="mw-cite-backlink"><b><a href="#cite_ref-2">^</a></b></span> <span class="reference-text">The Coca Cola Company Form 10-K SEC Filing 2006, p 67</span> </li> </ol></div>    </div><noscript><img src="https://login.wikimedia.org/wiki/Special:CentralAutoLogin/start?type=1x1" alt="" width="1" height="1" style="border: none; position: absolute;"></noscript> <div class="printfooter" data-nosnippet="">Retrieved from "<a dir="ltr" href="https://en.wikipedia.org/w/index.php?title=Operating_margin&oldid=1239624735">https://en.wikipedia.org/w/index.php?title=Operating_margin&oldid=1239624735</a>"</div></div> <div id="catlinks" class="catlinks" data-mw="interface"><div id="mw-normal-catlinks" class="mw-normal-catlinks"><a href="/wiki/Help:Category" title="Help:Category">Categories</a>: <ul><li><a href="/wiki/Category:Financial_ratios" title="Category:Financial ratios">Financial ratios</a></li><li><a href="/wiki/Category:Business_economics" title="Category:Business economics">Business economics</a></li><li><a href="/wiki/Category:Pricing" title="Category:Pricing">Pricing</a></li></ul></div><div id="mw-hidden-catlinks" class="mw-hidden-catlinks mw-hidden-cats-hidden">Hidden categories: <ul><li><a href="/wiki/Category:Webarchive_template_wayback_links" title="Category:Webarchive template wayback links">Webarchive template wayback links</a></li><li><a href="/wiki/Category:Articles_with_short_description" title="Category:Articles with short description">Articles with short description</a></li><li><a href="/wiki/Category:Short_description_is_different_from_Wikidata" title="Category:Short description is different from Wikidata">Short description is different from Wikidata</a></li></ul></div></div> </div> </main> </div> <div class="mw-footer-container"> <footer id="footer" class="mw-footer" > <ul id="footer-info"> <li id="footer-info-lastmod"> This page was last edited on 10 August 2024, at 14:00<span class="anonymous-show"> (UTC)</span>.</li> <li id="footer-info-copyright">Text is available under the <a href="/wiki/Wikipedia:Text_of_the_Creative_Commons_Attribution-ShareAlike_4.0_International_License" title="Wikipedia:Text of the Creative Commons Attribution-ShareAlike 4.0 International License">Creative Commons Attribution-ShareAlike 4.0 License</a>; additional terms may apply. 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