Difference btw operating margin and gross margin

Bain BCG HelpASisterOut Mck RolandBerger
New answer on Jun 09, 2019
2 Answers
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Anonymous A asked on Jun 07, 2019

Could someone explian the difference? Thanks!

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Jorit
Expert
replied on Jun 07, 2019
ex-BCG | Kellogg MBA | 200+ coaching session| 50+ actual interviews | Flexible scheduling

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.

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Serhat
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replied on Jun 09, 2019
BCG | Kellogg MBA |82% Success rate| 450+ case interview| 5+ year consulting | 30+ projects in ~10 countries

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

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