Operating Margin Calculator Formula
Understand the math behind the operating margin calculator. Each variable explained with a worked example.
Formulas Used
Operating Margin
operating_margin = revenue > 0 ? (operating_income / revenue) * 100 : 0Total Operating Expenses
operating_expenses = revenue - operating_incomeVariables
| Variable | Description | Default |
|---|---|---|
revenue | Revenue(USD) | 1000000 |
operating_income | Operating Income (EBIT)(USD) | 200000 |
How It Works
How to Calculate Operating Margin
Formula
Operating Margin = (Operating Income / Revenue) x 100
Operating margin isolates the profitability of core business operations by excluding interest, taxes, and non-operating income. It reveals how efficiently management controls operating costs. Improving operating margin year over year signals growing operational discipline and pricing power.
Worked Example
A company has $1,000,000 in revenue and $200,000 in operating income.
revenue = 1000000operating_income = 200000
- 01Operating Margin = ($200,000 / $1,000,000) x 100 = 20%
- 02Total Operating Expenses = $1,000,000 - $200,000 = $800,000
- 03Twenty cents of every revenue dollar is operating profit.
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Open Operating Margin Calculator