Operating Margin Calculator
Calculate gross margin and operating margin to assess how efficiently a company converts revenue to profit.
Results
What is it?
Operating margin (= Operating Income / Revenue) measures what percentage of revenue remains after covering all operating costs (COGS + SG&A + R&D) but before interest and taxes. It is also known as EBIT margin. Gross margin shows profitability before operating expenses.
How to use
Enter total revenue, cost of goods sold (direct costs of producing goods/services), and operating expenses (SG&A, R&D, other overhead). The calculator computes gross profit, operating income, and both margin percentages.
Example scenario
Revenue $2M, COGS $800k, OpEx $600k: Gross profit = $1.2M (60% margin). Operating income = $600k (30% operating margin). This is a highly profitable business by most standards.
Pro tip
Compare operating margins to industry peers rather than absolute benchmarks. Software companies routinely exceed 20-30%; grocery chains may operate at 2-5%. A widening gap between gross margin and operating margin signals rising overhead costs worth investigating.