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Is there a difference btw the terms "Operating Margin" and "Gross Margin".
Recently I was looking at JNJ and the Value Line Suvey says that their operating margin for 2003 was 30.5%. However, when I calculate it myself (revenue = 41862, gross profit = 29686) I come up with 71%. This leads me to believe that the two terms are just inverse where operating margin is cost of revenue / sales, and gross margin is gross profit / sales. Please advise.
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Hi choli100,
Is there a difference btw the terms "Operating Margin" and "Gross Margin".
Yes, there is a difference...
gross profit = sales - cost of sales
operating income = gross profit - operating expenses
gross margin = gross profit / sales
operating margin = operating income / sales
Hope this helps.
regards,
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