Calculate operating income as a percentage of revenue to measure operational efficiency of your business. Operating margin shows how much profit a company makes on a dollar of sales after paying for variable costs of production but before accounting for interest and taxes.
Operating margin is calculated using this formula:
Operating income is the revenue minus operating expenses. It represents the profit a company makes from its operations before accounting for interest and taxes.
A good operating margin varies widely by industry. Generally:
It's best to compare your operating margin to industry benchmarks to determine how well your business is performing.