Operating Margin

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Indicator Description

A good Operating Margin is required for a company to be able to pay for its fixed costs or payout its debt, which implies that the higher the margin, the better. This ratio is most effective in evaluating the earning potential of a company over time when comparing it against a firm's competitors.

Operating Margin

 = 

Operating Income

Revenue

X

100

Operating Margin shows how much operating income a company makes on each dollar of sales. It is one of the profitability indicators which helps analysts to understand whether the firm is successful or not making money from everyday operations.

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