A profit margin refers to a measure of profitability. It is calculated by finding the net profit as a percentage of the revenue. Where as the operating margin, is the ratio of operating income divided by net sales, usually presented in percent.
The profit margin is an indicator of a company's pricing policies and its ability to control costs. Differences in competitive strategy and product mix cause the profit margin to vary among different companies. And a good operating margin is needed for a company to be able to pay for its fixed costs, such as interest on debt.
Net profit margin = net profit (after taxes) / revenue * 100%
Operating margin = operating income / net revenue
Where Operating Margin is :-
The amount of profit realized from a business's operations after taking out operating expenses - such as cost of goods sold (COGS) or wages - and depreciation. Operating income takes the gross income (revenue minus COGS) and subtracts other operating expenses and then removes depreciation. These operating expenses are costs which are incurred from operating activities and include things such as office supplies and heat and power. Operating Income is typically a synonym for earnings before interest and taxes (EBIT) and is also commonly referred to as "operating profit" or "recurring profit".
Calculated as:
The profit margin is an indicator of a company's pricing policies and its ability to control costs. Differences in competitive strategy and product mix cause the profit margin to vary among different companies. And a good operating margin is needed for a company to be able to pay for its fixed costs, such as interest on debt.
Net profit margin = net profit (after taxes) / revenue * 100%
Operating margin = operating income / net revenue
Where Operating Margin is :-
The amount of profit realized from a business's operations after taking out operating expenses - such as cost of goods sold (COGS) or wages - and depreciation. Operating income takes the gross income (revenue minus COGS) and subtracts other operating expenses and then removes depreciation. These operating expenses are costs which are incurred from operating activities and include things such as office supplies and heat and power. Operating Income is typically a synonym for earnings before interest and taxes (EBIT) and is also commonly referred to as "operating profit" or "recurring profit".
Calculated as:
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