What is the formula for Operating Margin?

Operating Margin is a measurement of what proportion of a company's revenue is left over, before taxes and other indirect costs are incurred, after paying for variable costs of production like wages, raw materials etc.

A good operating margin is required for a company to be able to pay for its fixed costs like interest on its debt. A higher operating margin means that the company has less financial risk.

Formula:

Operating Margin = (Operating Income / Revenue)

Operating income is the difference between operating revenues and operating expenses