operating margin

Definition

Operating income divided by revenue, showing what percentage of sales remains after covering operating expenses but before interest and taxes. It's the profitability measure that reveals whether your business model works or you're just moving money around creatively.

Example Usage

The operating margin of 2% meant they made $2 on every $100 in sales, which barely covered the cost of the celebration pizza.

Origin

Standard financial metric developed as income statement analysis became formalized in the early 20th century.

Fun Fact

Tech companies obsess over operating margins because software scales beautifully—each additional customer costs almost nothing once you've built the product.

Source: Financial performance metrics

Related Terms

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hard close

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capitalism

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loans

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indebtedness

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receivership

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💰 Finance / Accounting

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