Operating margin is the percentage of profit a company makes on each dollar of revenue.
Operating margin is calculated by dividing net income by net revenue.
For example, if a company has net income of $100,000 and net revenue of $1,000,000, its operating margin is 10%.
Operating margin is a great way to determine how profitable a company is. It's also a great way to compare profitability between companies.
For example, if Company A has an operating margin of 10% and Company B has an operating margin of 20%, Company B is likely more profitable than Company A.
It can be difficult to calculate Operating Margin directly inside of Xero; that's where Causal comes in.
Causal is a modelling tool which lets you build models on top of your Xero data. You simply connect Causal to your Xero account, and then you can build formulae in Causal to calculate your Operating Margin.
Causal lets you build models effortlessly and share them with interactive, visual dashboards that everyone will understand.
In Causal, you build your models out of variables, which you can then link together in simple plain-English formulae to calculate metrics like Operating Margin. This makes your models easy to understand and quick to build, so you can spend minutes, not days, on your models.
When you're done, you can share the link to your model with stakeholders. They'll be able to view your model's outputs in a visual dashboard, rather than a jumble of tabs and complex formulae. The dashboards are interactive, letting viewers tweak your assumptions to see how they affect the model's outputs.
Causal lets you add visuals in a single click, letting you plot out graphs and distributions for metrics like Operating Margin.