- #1
musicgold
- 304
- 19
Hi,
I am confused by this relatively simple problem.
The operating margin of a business = (Revenue – costs)/Revenue
M = (R-C)/R = 1 – C/R
Now I wish to find the sensitivity of M to changes in R. So I try to differentiate the equation by R
dM/dR = C/R^2
But this equation doesn’t make any sense to me. For example, consider this figures: R=100, C=38,
If R increases by 1%, M increases by 0.38%.
I am not sure what I am doing wrong.
Thanks.
I am confused by this relatively simple problem.
The operating margin of a business = (Revenue – costs)/Revenue
M = (R-C)/R = 1 – C/R
Now I wish to find the sensitivity of M to changes in R. So I try to differentiate the equation by R
dM/dR = C/R^2
But this equation doesn’t make any sense to me. For example, consider this figures: R=100, C=38,
If R increases by 1%, M increases by 0.38%.
I am not sure what I am doing wrong.
Thanks.