Business calculators
Operating Margin Calculator
Find operating income and margin after cost of goods sold and operating expenses. Your inputs stay in this browser.
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What this calculator measures
Operating margin shows what share of revenue is left after both the direct cost of what you sold and the ongoing cost of running the business — before interest and taxes. It sits between gross margin and net margin in how much it accounts for.
Comparing your operating margin with your gross margin on the same page shows how much of your gross profit is being absorbed by overhead.
Formula
Inputs and variables
- Revenue
- Enter the money amount used by this formula.
- Cost of goods sold
- Enter the money amount used by this formula.
- Operating expenses
- Rent, salaries, marketing, and other costs to run the business, excluding interest and taxes.
How to use the calculator
- Choose a display currency when money fields are present.
- Enter values that cover the same period, scope, and currency.
- Review the result, formula, and worked example before using the estimate in a decision.
- Change one assumption at a time to understand what drives the result.
Worked example
- 1Revenue is $500,000. Cost of goods sold is $300,000, giving a gross profit of $200,000 and a 40% gross margin.
- 2Operating expenses are $120,000, so operating income is $200,000 - $120,000 = $80,000.
- 3Operating margin is $80,000 / $500,000 x 100 = 16%.
How to interpret the result
A wide gap between gross margin and operating margin points to high overhead relative to revenue; a narrow gap means most of the gross profit is reaching the operating line.
Common mistakes and limits
- Including interest or tax in operating expenses, mixing time periods between revenue and cost figures, or treating operating margin as available cash before financing and tax obligations.
Frequently asked questions
Is operating margin the same as net margin?
No. Net margin also subtracts interest and taxes; operating margin stops before those.
What counts as an operating expense?
Costs of running the business day to day — rent, salaries, marketing, and similar — but not interest or taxes.
Can operating margin exceed gross margin?
No. Operating margin subtracts more costs than gross margin, so it is always equal to or lower.