Result
Operating margin
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This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.
How it is calculated
Operating profit = revenue − cost of goods sold (COGS) − operating expenses. Operating margin = operating profit ÷ revenue × 100% — the share of revenue left after every cost of running the core business, but before loan interest and income tax.
It sits between gross and net margin: gross margin counts only direct cost, net margin counts absolutely everything, interest and taxes included. Operating margin shows whether the core business is profitable regardless of how it's financed or which tax jurisdiction it operates in — that makes it a fair way to compare operating efficiency between companies with different debt loads.
A falling operating margin alongside rising revenue is a common warning sign: costs of scaling (headcount, rent, marketing) are growing faster than revenue itself, and the business is losing economies of scale instead of gaining them.