Operating margin

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In business, operating margin is the ratio of operating income (operating profit in the UK) divided by net sales, usually presented in percent.

\mathrm{Operating\ margin} = \left ( \frac {\mathrm{Operating\ income}}{\mathrm{Revenue}} \right )

Contents

[edit] Example

[edit] The Coca Cola Company

Consolidated Statements of Income[1]
(In millions)
Net Operating Revenues $ 24,088
Gross Profit $ 15,
Operating Income $ 6,318
Income Before Income Taxes $ 6,578
Net Income $ 5,080

(Relevant figures in italics)

\mathrm{Operating\ margin} = \left ( \frac {6,318}{24,088} \right ) = \underline{\underline{26.23 %}}

It is a measurement of what proportion of a company's revenue is left over, before taxes, after paying for variable costs of production as wages, raw materials, etc. A good operating margin is needed for a company to be able to pay for its fixed costs, as interest on debt.

[edit] See also

[edit] External links

[edit] References

  1. ^ The Coca Cola Company Form 10-K SEC Filing 2006, p 67
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