metrics explained

Gross Margin vs Operating Margin: What's the Difference?

Gross margin and operating margin are two important financial ratios that measure a company's profitability. They are both calculated by dividing a company's revenue by its costs, but they differ in what costs are included in the calculation. Gross margin only includes the costs of goods sold, while operating margin includes all of a company's costs, including selling, general, and administrative expenses.

Gross margin is a good measure of a company's profitability from its core operations. It shows how much profit a company makes on each dollar of sales after accounting for the cost of goods sold. Operating margin is a more comprehensive measure of profitability that includes all of a company's costs, not just the cost of goods sold.

Operating margin is a better measure of a company's overall profitability because it includes all of the company's costs. However, gross margin is a good measure of a company's profitability from its core operations.

Gross Margin

Gross margin is a financial ratio that measures a company's profitability from its core operations. It is calculated by dividing a company's revenue by its costs of goods sold.

Gross margin is a good measure of a company's profitability because it shows how much profit a company makes on each dollar of sales after accounting for the cost of goods sold.

Operating Margin

Operating margin is a financial ratio that measures a company's profitability from its overall operations. It is calculated by dividing a company's revenue by its total costs, including selling, general, and administrative expenses.

Operating margin is a better measure of a company's overall profitability because it includes all of the company's costs, not just the cost of goods sold.

Difference Between Gross Margin and Operating Margin

The main difference between gross margin and operating margin is that gross margin only includes the costs of goods sold, while operating margin includes all of a company's costs, including selling, general, and administrative expenses.

Gross Margin

Gross margin is a financial ratio that measures a company's profitability from its core operations. It is calculated by dividing a company's revenue by its costs of goods sold.

Gross margin is a good measure of a company's profitability because it shows how much profit a company makes on each dollar of sales after accounting for the cost of goods sold.

Operating Margin

Operating margin is a financial ratio that measures a company's profitability from its overall operations. It is calculated by dividing a company's revenue by its total costs, including selling, general, and administrative expenses.

Operating margin is a better measure of a company's overall profitability because it includes all of the company's costs, not just the cost of goods sold.

Key Takeaways

Gross margin is a financial ratio that measures a company's profitability from its core operations. It is calculated by dividing a company's revenue by its costs of goods sold.

Operating margin is a financial ratio that measures a company's profitability from its overall operations. It is calculated by dividing a company's revenue by its total costs, including selling, general, and administrative expenses.

Gross margin is a good measure of a company's profitability from its core operations. Operating margin is a better measure of a company's overall profitability.

Comparison of Gross Margin and Operating Margin

Gross Margin vs. Operating Margin: What's the Difference?

Gross MarginOperating MarginMeasures a company's profitability from its core operationsMeasures a company's profitability from its overall operationsCalculated by dividing a company's revenue by its costs of goods soldCalculated by dividing a company's revenue by its total costs, including selling, general, and administrative expensesIncludes the costs of goods sold in the calculationIncludes all of a company's costs in the calculationShows how much profit a company makes on each dollar of sales after accounting for the cost of goods soldShows how much profit a company makes on each dollar of sales after accounting for all of the company's costs

Gross margin and operating margin are two important financial ratios that measure a company's profitability. They are both calculated by dividing a company's revenue by its costs, but they differ in what costs are included in the calculation. Gross margin only includes the costs of goods sold, while operating margin includes all of a company's costs, including selling, general, and administrative expenses.

Gross margin is a good measure of a company's profitability from its core operations. It shows how much profit a company makes on each dollar of sales after accounting for the cost of goods sold. Operating margin is a more comprehensive measure of profitability that includes all of a company's costs, not just the cost of goods sold.

Operating margin is a better measure of a company's overall profitability because it includes all of the company's costs. However, gross margin is a good measure of a company's profitability from its core operations.

Gross Margin

Gross margin is a financial ratio that measures a company's profitability from its core operations. It is calculated by dividing a company's revenue by its costs of goods sold.

Gross margin is a good measure of a company's profitability because it shows how much profit a company makes on each dollar of sales after accounting for the cost of goods sold.

Operating Margin

Operating margin is a financial ratio that measures a company's profitability from its overall operations. It is calculated by dividing a company's revenue by its total costs, including selling, general, and administrative expenses.

Operating margin is a better measure of a company's overall profitability because it includes all of the company's costs, not just the cost of goods sold.

Difference Between Gross Margin and Operating Margin

The main difference between gross margin and operating margin is that gross margin only includes the costs of goods sold, while operating margin includes all of a company's costs, including selling, general, and administrative expenses.

Gross Margin

Gross margin is a financial ratio that measures a company's profitability from its core operations. It is calculated by dividing a company's revenue by its costs of goods sold.

Gross margin is a good measure of a company's profitability because it shows how much profit a company makes on each dollar of sales after accounting for the cost of goods sold.

Operating Margin

Operating margin is a financial ratio that measures a company's profitability from its overall operations. It is calculated by dividing a company's revenue by its total costs, including selling, general, and administrative expenses.

Operating margin is a better measure of a company's overall profitability because it includes all of the company's costs, not just the cost of goods sold.

Key Takeaways

Gross margin is a financial ratio that measures a company's profitability from its core operations. It is calculated by dividing a company's revenue by its costs of goods sold.

Operating margin is a financial ratio that measures a company's profitability from its overall operations. It is calculated by dividing a company's revenue by its total costs, including selling, general, and administrative expenses.

Gross margin is a good measure of a company's profitability from its core operations. Operating margin is a better measure of a company's overall profitability.

Comparison of Gross Margin and Operating Margin

Gross Margin vs. Operating Margin: What's the Difference?

Gross MarginOperating MarginMeasures a company's profitability from its core operationsMeasures a company's profitability from its overall operationsCalculated by dividing a company's revenue by its costs of goods soldCalculated by dividing a company's revenue by

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