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Financial statements
Operating margin
Operating income (revenue less cost of sales and operating expenses) as a share of revenue. Profitability before interest and tax — the margin management actually controls.
Owned by: Entry analystTest band: Entry analyst
The formula
Operating margin % = Operating income ÷ Revenue
In practice
The cleanest cross-company comparison, because it ignores how the business is financed and taxed.
The kind of thing the test asks
- Two competitors: A has 20% operating margin and 12% net margin; B has 14% operating and 12% net. Which runs its operations more profitably?
More in financial statements
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