Operating margin is a key financial metric that shows how much profit a company retains from its revenue after covering essential operating costs such as payroll, taxes, utilities, and materials. It is calculated by dividing operating income by total revenue and is expressed as a percentage.
A higher operating margin indicates that a company is efficient at managing its core business expenses and is generating more profit from each dollar of sales. Investors and analysts use this ratio to compare profitability across companies and industries.
It also helps businesses assess their financial health and make informed decisions about cost management.