Definition
Operating margin provides insight into the financial health of a company's core operations. It compares its operating income to its revenue, an important metric you should keep track of.
In the room
How the word shows up in a real conversation.
A mentor asks, “What is your Operating margin?” The useful answer is concrete: percentage of revenue that remains as operating income after operating expenses. A slide title is not an answer.
Common mistake
Using Operating margin as a label instead of a fact. If you cannot point to the evidence — a number, a customer, or a written assumption — you are using the word as jargon.
See also
Operating Agreement
Legal document that outlines the rules and regulations for running a business.
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Operating Expenses
Costs incurred in the day-to-day operations of a business.
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Operating income
Profit generated from core business operations before interest and taxes.
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Operating lease
Lease agreement that doesn't transfer ownership of the leased asset.
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