Operating Margin Calculator

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Breakdown also gives you gross margin and a cost split. Direct is fastest if you have EBIT. Reverse finds the operating income a target margin requires.
Total net sales over the period.
Direct cost of producing the goods or services sold (materials, direct labor).
Wages, rent, marketing, SG&A and other overhead, excluding interest and taxes.
Non-cash D&A. Leave blank or zero if it is already inside operating expenses.
Currency
Operating marginHealthy margin
12%
Operating income (EBIT)$120,000
Gross profit$400,000
Gross margin40%
Operating profit per $1 of sales$0.120
Cost of goods sold$600,000
Operating expenses$250,000
Depreciation & amortization$30,000

12% of revenue is kept as operating profit.

  • For every $1 of sales, about 0.12 is left after cost of goods sold and operating expenses.
  • Gross margin is 40%, so operating expenses and D&A pull the margin down from there to 12%.
  • Operating margin sits above net margin because it ignores interest and taxes, it isolates how well the core business runs.
  • Good margins vary widely by industry: software often runs 20-40%, while grocery and retail commonly run in the low single digits.

Next stepCompare this margin against the same company over prior years and against direct competitors, not the whole market.

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