📊 Operating Margin Calculator
Calculate operating efficiency
EBIT (Earnings Before Interest and Taxes)
How to Use This Calculator
Enter Operating Income
Input the operating income (EBIT - Earnings Before Interest and Taxes) - profit from core operations before interest and taxes.
Enter Revenue
Enter the total revenue - all income from sales, services, or other business activities for the same period.
Review Operating Margin
See the operating margin percentage - the percentage of revenue that becomes operating profit after covering operating expenses. Higher margins indicate better operational efficiency.
Formula
Operating Margin = (Operating Income / Revenue) × 100
Example Calculation:
If operating income $300,000, revenue $1,000,000:
• Operating margin = ($300,000 / $1,000,000) × 100 = 30%
• This means 30% of revenue becomes operating profit
About Operating Margin Calculator
An operating margin calculator helps you calculate the operating margin percentage, which measures the profitability of sales after covering operating expenses. Operating Margin = (Operating Income / Revenue) × 100. Operating margin shows what percentage of revenue remains after covering operating expenses and is a key indicator of operational efficiency and pricing power. Operating margin excludes interest and taxes, focusing on core operating profitability. Higher margins indicate better operational efficiency and pricing power.
When to Use This Calculator
- Profitability Analysis: Assess operating profitability
- Performance Comparison: Compare operating efficiency across companies
- Financial Analysis: Analyze operational efficiency
- Business Evaluation: Evaluate operational performance
Understanding Operating Margin
- Higher Margin: Better operational efficiency (generally good)
- Lower Margin: Lower operational efficiency (may need improvement)
- Industry Standards: Margins vary by industry
- Operating Focus: Focuses on operating profitability, excluding financing and taxes
Why Use Our Calculator?
- ✅ Profitability Analysis: Calculate operating margin accurately
- ✅ Performance Comparison: Compare operating efficiency
- ✅ Financial Analysis: Analyze operational efficiency
- ✅ Business Evaluation: Evaluate operational performance
- ✅ 100% Free: No registration or payment required
Frequently Asked Questions
What is operating margin?
Operating margin measures the profitability of sales after covering operating expenses. It's calculated as (Operating Income / Revenue) × 100. Operating margin shows what percentage of revenue remains after covering operating expenses and is a key indicator of operational efficiency and pricing power. Operating margin excludes interest and taxes, focusing on core operating profitability. Higher margins indicate better operational efficiency and pricing power.
What's a good operating margin?
A good operating margin depends on the industry and business model. Generally, operating margins above 20% are considered excellent, 10-20% are good, 5-10% are average, and below 5% are low. However, margins vary significantly by industry: Technology (15-25%), Retail (2-5%), Manufacturing (5-10%), Services (10-15%). Compare to industry benchmarks and historical trends. Higher margins indicate better operational efficiency and pricing power.
How is operating margin different from net margin?
Operating margin excludes interest and taxes, while net margin includes all expenses. Operating margin = Operating Income / Revenue (excludes interest, taxes). Net margin = Net Income / Revenue (includes all expenses, including interest and taxes). Operating margin focuses on operating profitability, while net margin shows final profitability. Operating margin is always higher than net margin because it excludes interest and taxes. Both metrics are useful for different purposes.
Why is operating margin important?
Operating margin is important because it: (1) Measures operational efficiency - shows how efficiently operations generate profit, (2) Pricing power - indicates pricing power and cost management, (3) Performance comparison - enables comparison of operating efficiency across companies, (4) Operating focus - focuses on operating profitability, excluding financing and tax effects, (5) Financial analysis - key metric for evaluating operational performance. Operating margin provides a clearer view of operating performance than net margin because it excludes financing and tax effects.