How Do You Calculate An Operating Margin For A Business?
Operating margin is used to measure how much of every dollar of the company’s sales results in profits. The larger the operating margin, the more attractive companies generally look to investors because a larger operating margin means the company has more cash to spend on fixed costs or expansion rather than products to be sold. According to the Securities and Exchange Commission, operating margin is generally expressed as a percentage. To calculate the operating margin, you need to know the operating income and the net sales for the company. Total the amount of operating income your business had during the specified period. Operating income equals the total profit for the company before taxes and interest payments are figured in. Total the net sales for the company during the given period. Net sales equals total sales made after returns, discounts, damaged goods and other losses are accounted for. Divide the operating income by your net sales. For example, if your operating income equ
