Operating Margin Calculator
Calculate operating profit margin to assess operational efficiency
Calculate Operating Margin
Total revenue or sales for the period
Direct costs of producing goods/services
SG&A, R&D, and other operating costs
Operating Margin Results
Formula: Operating Margin = (Operating Income ÷ Revenue) × 100
Operating Income: $0 - $0 - $0 = $0
Margin Analysis
Example: Company Alpha
Financial Data
Revenue: $10,000,000
Cost of Goods Sold: $5,000,000
Operating Expenses: $2,500,000
Gross Profit: $5,000,000
Operating Income: $2,500,000
Gross Margin: 50%
Calculation
Operating Income = $10,000,000 - $5,000,000 - $2,500,000 = $2,500,000
Operating Margin = ($2,500,000 ÷ $10,000,000) × 100 = 25%
Company Alpha retains $0.25 of operating profit for every $1 of revenue
Industry Benchmarks
High Margin Industries
- • Software/SaaS: 20-40%
- • Professional Services: 15-30%
- • Pharmaceuticals: 15-25%
Moderate Margin Industries
- • Technology Hardware: 8-15%
- • Consumer Goods: 5-12%
- • Financial Services: 10-20%
Low Margin Industries
- • Retail: 2-8%
- • Transportation: 3-7%
- • Food & Beverage: 3-6%
Operating Margin Components
Revenue
Total sales or income
COGS
Direct production costs
Operating Expenses
SG&A, R&D, other OpEx
Operating Income
Profit from operations (EBIT)
Optimization Tips
Increase revenue through better pricing or volume
Reduce COGS through supply chain efficiency
Control operating expenses and overhead
Compare with industry peers for context
Understanding Operating Margin
What is Operating Margin?
Operating margin, also known as operating profit margin, measures how much profit a company makes from its operations as a percentage of revenue. It shows operational efficiency by excluding interest and tax expenses, focusing purely on core business performance.
Why is Operating Margin Important?
- •Measures operational efficiency and cost control
- •Enables comparison across companies and industries
- •Indicates management's ability to generate profit
- •Higher margins provide more flexibility for growth
Operating Margin Formula
Operating Margin = (Operating Income ÷ Revenue) × 100
Operating Income = Revenue - COGS - Operating Expenses
- Revenue: Total sales or income from operations
- COGS: Cost of Goods Sold (direct costs)
- Operating Expenses: SG&A, R&D, depreciation
- Operating Income: EBIT (Earnings Before Interest & Tax)
Note: Operating margin excludes interest and tax expenses, focusing on operational performance only.