Business Finance
Operating Margin Calculator
Calculate operating income (EBIT) and operating margin percentage from revenue, COGS, and operating expenses — before interest and taxes.
Includes salaries, rent, marketing, depreciation — all operating costs except interest and taxes.
🔒 All calculations happen instantly in your browser. No data is sent to any server.
How the calculation works
Operating Income (EBIT) = Revenue − COGS − Operating Expenses
Operating Margin % = (Operating Income ÷ Revenue) × 100
EBIT = Earnings Before Interest and Taxes. It excludes financing costs (interest) and tax effects, making it useful for comparing operational efficiency across companies with different capital structures.
Example: Revenue $500k · COGS $200k · OpEx $150k → EBIT = $150k · Operating Margin = 30%
Frequently Asked Questions
- Operating margin measures how much profit a company makes from its core operations per dollar of revenue, before accounting for interest payments and taxes. It's calculated as EBIT ÷ Revenue.
- Because it strips out financing decisions (debt level) and tax jurisdiction effects, it's the best metric for comparing operational efficiency between companies or over time.
- Highly variable by industry. Software: 20–35%. Manufacturing: 10–20%. Retail: 3–8%. Airlines: 3–6%. A margin improving year-over-year is generally more important than hitting a specific number.
- Operating margin uses EBIT (includes depreciation and amortisation). EBITDA margin adds back D&A, making it a closer approximation of cash operating earnings. EBITDA is higher than EBIT for asset-heavy businesses.
- Reduce COGS through better purchasing or process efficiency, cut operating overhead (especially fixed costs), or increase revenue without proportionally increasing costs (operating leverage).