What is Operating Margin?
Operating Margin measures what percentage of revenue is left after subtracting both cost of goods sold AND operating expenses (R&D, sales, marketing, general administration). It strips out interest and tax effects, focusing purely on how efficiently the core business converts revenue to profit.
Formula
Operating Margin = Operating Income ÷ Revenue
How TopTier Strategy uses Operating Margin
Tracking operating margin expansion (or compression) is a primary signal in our Profitability pillar.
Related Glossary Terms
Other concepts in the Profitability pillar.
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