What Is the Operating Profit Margin Formula?

What Is the Operating Profit Margin Formula?

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.