# What is an operating margin and how do you calculate it?

What is Operating Margin, and How Do You Calculate It? What are gross and operating margins? Gross margin is the percentage of revenue that a company keeps after subtracting the cost of goods sold (COGS). Operating margin is the percentage of revenue that a company keeps after subtracting all of its operating expenses.

### What is the difference between operating profit and operating margin?

Operating profit is the profit remaining after all operating expenses have been paid. This includes the cost of goods sold, as well as selling, general, and administrative expenses. Operating margin is the ratio of operating profit to total revenue. How do you calculate operating income on a balance sheet? Operating income is calculated by subtracting operating expenses from operating revenues. Operating expenses include things like cost of goods sold, selling, general, and administrative expenses. What is operating profit on an income statement? Operating profit is a company's profit after deducting operating expenses from gross profit. Operating expenses include things like rent, utilities, and payroll. This number is also sometimes referred to as "operating income." What affects operating profit margin? Operating profit margin is a financial ratio that demonstrates how much profit a company generates from its operations, after deducting operating expenses. This ratio is also known as "operating income margin" or "operating profit ratio".

There are a few key factors that can affect a company's operating profit margin:

1. Revenue: Obviously, the higher the company's revenue, the higher its operating profit margin will be.

2. Operating expenses: Operating expenses include things like cost of goods sold, selling, general and administrative expenses, and depreciation and amortization. The lower these expenses are, the higher the company's operating profit margin will be.

3. Asset utilization: This refers to how efficiently a company is using its assets to generate revenue. The higher the asset utilization, the higher the operating profit margin will be.

4. Product mix: This refers to the mix of products and services that a company sells. The more profitable the mix, the higher the operating profit margin will be.

5. Pricing: This refers to the prices that a company charges for its products and services. The higher the prices, the higher the operating profit margin will be.