Operating Margin

An operating margin is a key financial metric that measures a company's profitability. It is calculated by taking the company's operating income (also known as EBIT or Earnings Before Interest and Taxes), and dividing it by the company's total revenue. Operating margin is expressed as a percentage and is used to compare the profitability of a company's core activities to its competitors.

For example, if Company A has an operating income of $10 million and total revenue of $50 million, its operating margin would be 20% ($10 million/$50 million).

The operating margin is an important measure of a company's performance as it provides an indication of how efficiently the company generates income from its operations. It also helps investors assess the risk/reward of investing in a company.