Translation: Operating Margin = Operating Margin.

Simplified Definition: It is a "efficiency" ratio. It tells us how many "cents" remain as profit for the company from every "dollar" it sells after paying operating costs.

What Does It Mean for You?

  • Management Measure: High margin means strong management that controls its costs well, and low margin means the company "works hard to earn little".

Common Question: Which margins are better: "Google Software" margins or "Supermarket" margins?

  • Answer: Software companies have huge margins because the cost of copying a program is zero, while supermarkets have very small margins and make up for it by selling huge quantities.