How to Figure the Operating Margin
An operating margin measures how much of a company's revenue it keeps as profit before accounting for the external charges of interest and taxes. For example, a company might have a profitable business model but be so burdened with debt that the company loses money after it pays all the interest it owes; another company might have a minimally successful model but look better because it carries no debt. Typically, the operating margin is expressed as a percentage.
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Instructions
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Check the company's accounting records, annual report or balance sheet to find the company's total income from operations and the company's total revenue. The income from operations does not account for taxes or interest.
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Divide the company's income from operations by the company's total revenue. For example, if the company had $6.5 million in income from operations and $80 million in revenues, divide $6.5 million by $80 million to get 0.08125.
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Multiply the result by 100 to convert it the operating margin expressed as a percentage. In this example, multiply 0.08125 by 100 to find the operating margin equals 8.125 percent.
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