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Operating Margin

Operating Margin
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Operating Margin

    Operating Margin KPI is a key performance indicator that shows the proportion of company’s revenue that is left after paying operating costs such as salaries, SG&A Expenses, overhead costs, advertising, utilities, etc. Operating Margin lets you know how much the company gets on each dollar received from selling (deducting non-operating income). The higher the value of Operating Margin is, the more successful the company is. Operating Margin is calculated by the following formula:

    Operating Margin = Operating Income / Revenue (or Revs)

    Operating Income is the company’s income from normal current operations without interest expense, taxes, profit of investment and other forms of non-operating income.

    Revenue is the total amount in money the company has for selling their goods and services. Revenue is calculated by the formula:

    Revenue (REVs) = Quantity of units sold x Cost per unit

    The main purposes of using Operating Margin KPI are to compare the company’s progress with one of its competitors within different periods of time and define a company’s pricing strategy.

    To calculate Operating Margin please do the following:

  • Create custom field "Operating Income" with the formula:
  • Operating Income = Gross Profit - SG&A Expenses

  • Create custom field "Revenue" (REVs) with the following formula:
  • Revenue (REVs) = Quantity of units sold x Cost per unit

  • Create custom field "Operating Margin" with the formula:
  • Operating Margin = Operating Income / Revenue (or Revs)

  • On Task Tree select task group for which you need to display Operating Margin and select "Custom fields options"
  • Set the following custom fields settings for the following custom fields:  "Units Quantity" and "Cost per unit" used to calculate "Revenue" and SG&A Expenses used to calculate "Operating Income"
    • - In "Settings for" select "This task group"
    • - select "Enable"
    • - in "Aggregated (for task group)" field select "Sum" from drop-down list and the corresponding custom field name:
  • Select custom field "REVs", "COGS", "Operating Income",  "Gross Profit" and "Operating  Margin" set the following settings for these custom fields:
    • - In "Settings for" select "This task group"
    • - select "Enable"
    • - select "Calculated by custom field formula (for task group)"
  • Operating Margin KPI on Task Tree

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