Operating margin explained

In business, operating margin—also known as operating income margin, operating profit margin, EBIT margin and return on sales (ROS)—is the ratio of operating income ("operating profit" in the UK) to net sales, usually expressed in percent.

Operatingmargin=

	Operatingincome
	Revenue

Net profit measures the profitability of ventures after accounting for all costs.^[1]

Return on sales (ROS) is net profit as a percentage of sales revenue. ROS is an indicator of profitability and is often used to compare the profitability of companies and industries of differing sizes. Significantly, ROS does not account for the capital (investment) used to generate the profit. In a survey of nearly 200 senior marketing managers, 69 percent responded that they found the "return on sales" metric very useful.

Unlike Earnings before interest, taxes, depreciation, and amortization (EBITDA) margin, operating margin takes into account depreciation and amortization expenses.

Notes and References

Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc. . The Marketing Accountability Standards Board (MASB) endorses the definitions, purposes, and constructs of classes of measures that appear in Marketing Metrics as part of its ongoing Common Language: Marketing Activities and Metrics Project .