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Difference btw operating margin and gross margin

Anonymous A asked on Jun 07, 2019

Could someone explian the difference? Thanks!

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Jorrit
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replied on Jun 07, 2019
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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.

Serhat replied on Jun 09, 2019
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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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