Operating margin is calculated by dividing operating income by net sales or revenue. The result is often expressed as a percentage. Operating income is a measurement of profit that includes all expenses except interest and income tax.
For example, if Company X's operating income is $10,000 and net revenues equal $30,000, the operating margin is calculated by dividing 10,000 by 30,000, which equals 0.333, or 33.3 percent. Another way to express this is that Company X makes $0.33 for every dollar of sales before paying taxes and interest on loans. Extraneous factors, such as legal fees or one-time costs, are often left out of the calculation because they do not reflect a company's typical business.