What is it?
The operating margin measures how much profit a company makes on a dollar of sales, after paying for variable costs of production, such as wages and raw materials, but before paying interest or tax. It is calculated by dividing a company’s operating profit by its net sales expressed as a percentage.
Who is interested?
The financial community and investors.
What does it tell me?
The operating profit margin shows how profitable a company is in its operations regardless of its capital structure or the tax regime in which it operates. Investors can compare operating profit margins across companies and industries to assess relative profitability.