Personal Finance & Money Asked on May 11, 2021
It is said that high Operating Margin means that the company is efficient in its operations and is good at turning sales into profits.
But let’s suppose that market demand has increased. The company did nothing, it is working the same way as earlier. But its revenue is getting higher, while operating expences are quite possible stay the same (or about the same). In this case the Operating Margin is gonna be higher despite the fact that the company’s efficiency hasn’t changed.
Am I right that Operating Margin is not really an indicator of company’s efficiency, instead decreasing revenue makes Operating Marging lower, increasing revenue makes Operating Margin higher?
If a company sees increased demand and can handle it with existing employees, capital and expenses, then it certainly has increased its efficiency (the same resources are producing more revenue). Thus the higher operating margin correctly reflects higher efficiency.
Correct answer by Orange Coast- reinstate Monica on May 11, 2021
Get help from others!
Recent Answers
Recent Questions
© 2024 TransWikia.com. All rights reserved. Sites we Love: PCI Database, UKBizDB, Menu Kuliner, Sharing RPP