What does a high operating margin indicate about a company?

A high operating margin indicates that a company generates more profit per sales dollar, reflecting its operational efficiency and effectiveness in managing costs related to its core business activities. The operating margin is calculated by taking the operating income and dividing it by total sales revenue, which provides insight into how well the company is converting revenue into operational profit.

When a company has a high operating margin, it suggests that it retains a significant percentage of revenue as profit after covering operating expenses, such as wages, rent, and materials. This can be a positive sign for investors as it may signify strong management, cost controls, or pricing power within the market.

The other options do not accurately reflect the implication of a high operating margin. For instance, while high employee wages could affect profit margins, they are not a direct indicator of operating margin itself. Similarly, a high level of debt does not correlate directly with operating margin, which focuses on operational performance rather than financing structure. Lastly, sales growth has no direct relationship with operating margin; a company can have high margins even if its sales growth is low. Therefore, option B is the most precise interpretation of what a high operating margin signifies.