Operating margin.
In plain English
If a company has an operating margin of 33%, then for every dollar of revenue about 33 cents is profit from running the business and about 67 cents went to the costs of running it. It measures how efficiently a company turns sales into profit, and because it is a percentage, it lets you compare a small company to a large one. A margin that shrinks while revenue grows means the company is getting bigger but not more efficient, which is a different story than the revenue headline tells.
01Why it matters
Revenue growth and margin can move in opposite directions. A company can sell more and keep less of each dollar at the same time. The margin tells you which is happening.
02The math, step by step
A company with an operating margin of 33% keeps about 33 cents of profit from each revenue dollar. If revenue grows the next year but the margin falls to 30%, the company is bigger and yet keeping less of every dollar it takes in.
03What this is NOT
Operating margin measures profit from the core business before interest and taxes. Net margin comes after interest and taxes, so it is usually lower and can move for reasons that have nothing to do with how the business ran.
04Receipts
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