Difference btw operating margin and gross margin

Hi,

Gross margin is margin when you take the revenue and deduct the direct costs associated with the product such as cost of goods sold. This is the gross margin in absolute dollars, if you want a percentage divide by the revenue)

The operating margin is if you take the revenue, deduct the direct costs but also all the indirect costs (overhead, rent, etc.).

Here is an article with a more detailed explanation:

https://www.investopedia.com/ask/answers/010815/what-difference-between-gross-profit-margin-and-operating-profit-margin.asp

Hope this helps.

Hi there,

Gross Margin:  (Revenue-COGS) / Revenue
Operating Margin: (Revenue-COGS-OPEX) / Revenue

*OPEX (Operating expenses) are expenses like utilities, rent, marketing overhead etc.

Cheers
Serhat