The formula to calculate the Operating Margin is:
\[ OPM = \frac{OI}{R} \]
Where:
An operating margin is a measure of the profitability of a company. It’s a ratio of the core operating income to the total revenue. In other words, it shows how profitable the core operations are in comparison to the total revenue. The operating margin helps in understanding the efficiency of a company's operations and its ability to manage expenses while generating revenue.
Let's assume the following values:
Using the formula:
\[ OPM = \frac{500000}{2000000} = 0.25 \times 100 = 25\% \]
The Operating Margin is 25%.
Let's assume the following values:
Using the formula:
\[ OPM = \frac{300000}{1500000} = 0.20 \times 100 = 20\% \]
The Operating Margin is 20%.
