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Operating Margin

Definition

Measuring how much money is left after paying the everyday costs of running the business. A better margin means more profit from each sale.

What to consider

  • Separate operating profit from non-operating items.
  • Monitor over different periods.
  • Use operating profit for internal performance reviews.

Real world scenarios

  • A manufacturing company in Detroit calculates operating profit before taxes and interest.
  • An entrepreneur assesses operating profit to gauge business efficiency.
  • A small firm uses operating profit to decide on reinvestment opportunities.

Related terms

Operating Profit
Budgeting for Business
E-commerce Financing
Business Loan
Pricing Strategy

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