Investing term

What is Operating margin?

Operating income as a percentage of revenue — how much survives all operating costs.

Operating margin is operating income as a percentage of revenue — how much profit the core business produces per sales dollar, before interest and taxes. It's a key efficiency gauge: a rising operating margin signals a business gaining leverage and discipline, while a falling one warns that costs are outpacing sales. Compare it within an industry for a fair read.

For example

A company turning $1.5M of operating income on $10M of revenue runs a 15% operating margin — fifteen cents of core profit per sales dollar.

Operating margin is taught hands-on in Stage 14 — Reading Financial Statements.

See the lesson →

Related terms

Accounts receivable (A/R)Money customers owe the company for goods or services already delivered but not yet paid.AccrualsAccounting entries that record revenue or expense before cash actually moves.Annual reportThe yearly disclosure that includes audited financials, MD&A, and footnotes — the primary source for serious investors.Balance sheetThe 'photo' statement — what the company owns, what it owes, and what's left for owners, on a single date.
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