Operating margin

All you want to know about Operating margin

In business, operating margin is the ratio of operating income (operating profit in the UK) divided by net sales, usually presented in percent.

\mathrm{Operating\ margin} = \left ( \frac {\mathrm{Operating\ income}}{\mathrm{Revenue}} \right )

Contents

Example

The Coca Cola Company

Consolidated Statements of Income[1]
(In millions)
Net Operating Revenues $ 24,088
Gross Profit $ 15,924
Operating Income $ 6,318
Income Before Income Taxes $ 6,578
Net Income $ 5,080

(Relevant figures in italics)

\mathrm{Operating\ margin} = \left ( \frac {6,318}{24,088} \right ) = \underline{\underline{26.23 %}}

It is a measurement of what proportion of a company's revenue is left over, before taxes, after paying for variable costs of production as wages, raw materials, etc. A good operating margin is needed for a company to be able to pay for its fixed costs, such as interest on debt.

See also

External links

References

  1. ^ The Coca Cola Company Form 10-K SEC Filing 2006, p 67
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