Operating Profit Margin

Operating Profit Margin (often shortened to just Operating Margin) provides an indicator of the operating efficiency and / or pricing strategy of a business.

It divides the operating income by revenue to identify the proportion of the revenue that remains after taking out the costs of operating the business (such as labour costs, material supplies, overheads, marketing, admin, etc.).

 

Operating Profit Margin = (Operating Profit / Revenue) x 100

 

This indicator is included in the book: Key Performance Indicators - the 75+ measures every manager needs to know, which contains an in-depth description of this KPI, as well as practical advice on data collection, calculations, target setting, and actual usage.

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