Operating margin

Operating margin is simply the profit margin calculated using operating profit:

operating profit ÷sales as a percentage

It is often calculated using adjusted operating profit.

Operating margin may help:

• Show how much of a change in operating profit comes from the change in margins, as opposed to the change in sales.
• Compare the margins of different companies in the same business.
• Estimate how much potential a company has to increase profits through margin expansion, or, conversely, how much profits may be threatened by price competition.
• Model future profits.