A company needs a healthy operating margin in order to pay for its fixed costs, such as interest on debt or taxes. A high operating margin is a good indicator a company is being well managed and is potentially less of a risk than a company with a lower operating margin.

What does a high operating margin mean?

A higher operating margin means that the company has less financial risk. Operating margin can be considered total revenue from product sales less all costs before adjustment for taxes, dividends to shareholders, and interest on debt.

Is a high operating profit margin good?

Higher operating margins are generally better than lower operating margins, so it might be fair to state that the only good operating margin is one that is positive and increasing over time. ... For example, an operating margin of 8% means that each dollar earned in revenue brings 8 cents in profit.