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How to Use the Operating Income Margin Profitability Metric

The operating income margin profitability metric measures the percentage difference between operating income and net sales. This metric differs from net profit margin in that it concerns itself only with income from operations, excluding a number of costs and revenues that go into measuring net income. You measure operating income margin with this equation:

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To put this metric to use, follow these steps:

  1. Find net sales near the top of the income statement.

  2. Find the operating income on the income statement if it’s listed; if it isn’t, calculate it by subtracting operating expenses and devaluation from the company’s gross income.

  3. Divide the operating income by net sales to get the operating income margin.

You may prefer to measure operating income margin rather than net income margin because it’s more strictly reflective of how profitable a company’s operations are and how competitive a company is in its primary purpose.

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