Operating Margin Calculator
Operating income and operating margin, EBITDA and EBITDA margin, and gross margin from revenue, cost of goods sold, operating expenses, depreciation and amortisation.
Result…
How it's calculated
Gross profit = revenue − COGS EBITDA = gross profit − operating expenses (before D&A) Operating income (EBIT) = EBITDA − depreciation − amortisation Margin = profit ÷ revenue × 100
Operating margin is the share of revenue left after paying for what you sold and for running the business, before interest and tax. It shows how well the core business makes money, separate from how it is financed. EBITDA adds back depreciation and amortisation, which are non-cash charges that spread the cost of equipment and intangible assets over their life, so EBITDA margin is closer to operating cash generation but ignores the cost of replacing those assets. Gross margin looks only at revenue minus cost of goods sold. Operating income here is the operating profit line; some reports call it EBIT, though EBIT can also include non-operating items.
Your numbers, step by step
About the Operating Margin calculator
This operating margin calculator shows how much of each sale is left after paying for what you sold and for running the business. From revenue, cost of goods sold, operating expenses, and depreciation and amortisation, it works out gross profit and gross margin, EBITDA and EBITDA margin, and operating income and operating margin. Tell it whether your operating expenses figure already includes depreciation, as many income statements do, and it separates them for you. Business owners, finance students, investors reading a company report and analysts comparing two firms can use it to see where the money goes between the top line and operating profit. Each margin is shown as a division of profit by revenue, so you can follow the working line by line.
How to use it
- Enter the “Revenue” for the period, the “Cost of goods sold” and the “Operating expenses”.
- Enter “Depreciation and amortisation” from the income statement or cash flow statement.
- Say whether your “Operating expenses” exclude depreciation and amortisation or already include them.
- Read the operating margin, then the EBITDA and gross margins below it.
Worked example
A business has revenue of 850,000, cost of goods sold of 510,000, operating expenses of 190,000 and depreciation and amortisation of 35,000. Gross profit = 850,000 − 510,000 = 340,000, a 40% gross margin. EBITDA = 340,000 − 190,000 = 150,000, a 17.65% margin. Operating income = 150,000 − 35,000 = 115,000, so the operating margin is 115,000 ÷ 850,000 × 100 = 13.53%.
Updated
Questions people ask
How do I calculate operating margin?
Divide operating income by revenue and multiply by 100. Operating income is revenue minus cost of goods sold, operating expenses, and depreciation and amortisation.
What is the formula for EBITDA margin?
EBITDA margin = EBITDA ÷ revenue × 100, where EBITDA is operating income with depreciation and amortisation added back. It is always at least as high as the operating margin.
What is a good operating margin?
It depends on the industry: businesses with low costs per sale, such as software, often run far higher margins than grocery or construction. Compare with your own past periods and with companies in the same line of business.
What is the difference between gross margin and operating margin?
Gross margin takes away only the cost of goods sold; operating margin also takes away running costs such as salaries, rent and marketing, and depreciation. The profit margin calculator covers net margin after interest and tax as well.
Why do I get a different EBITDA from a company's report?
The usual reason is depreciation counted twice or not at all: check whether the operating expenses line already includes it. Companies also adjust EBITDA for one-off items in their own way, and accounting standards draw the line between cost of goods sold and operating expenses differently; the gross profit calculator shows the first step on its own.