Ask a Fool: What Is Operating Margin?

Worldwide Invest Better Day 9/25/2012

In the spirit of better investing and in celebration of the first Worldwide Invest Better Day coming up on Sept. 25, Motley Fool analysts will be answering user- and reader-submitted questions leading up to the big event. "Ask a Fool" anything, and we'll do our best to help you invest better.

The term "operating margin" refers to the amount of profit you have for each $1 in sales after deducting all expenses other than interest and taxes. In the following video, Fool.com analyst Isaac Pino sheds light on what this means for the everyday investor, both in reading an income statement and in relation to other margins and figures.

Operating margin can be especially useful in evaluating a company such as 3M (NYSE: MMM  ) , which manufactures all kinds of products and materials ranging from natural gas vehicle liners to Scotch tape. Looking at operating margins is a good way to break down and examine different components of the business, seeing how they contribute. Watch the following video to learn more.

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Isaac Pino and The Motley Fool have no positions in the stocks mentioned above. Motley Fool newsletter services recommend 3M. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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