Operating margin calculator
- Formula
- Operating income ÷ Revenue
Operating margin = Operating income ÷ RevenueA loss is a negative number.
Operating margin
15.0%
How it’s worked out
- 1Operating income ÷ revenue$900,000 ÷ $6,000,00015.0%
Runs in your browser; nothing you type is sent anywhere. Amounts in US dollars.
Worked on a real month of books
Northwind Traders, Inc., September 2026 (accrual basis, USD), the month the free course is taught on. Every figure is read off the course's posted ledger, not typed.
- 1Operating income$14,500 − $11,950$2,550
- 2Operating margin$2,550 ÷ $31,5008.1%
See the statements these come from in the course.
How to read it
Operating margin is the share of revenue left after every operating cost — the profitability of the business itself, before financing and tax.
For startups it is usually negative by design; its trend shows whether scale is improving the economics.
Common mistakes
- Including interest or tax, which belong below operating income.
- Comparing operating margins across companies that classify costs differently.
Questions
- How is operating margin different from gross margin?
- Gross margin deducts only cost of revenue. Operating margin also deducts sales, marketing, R&D and G&A.
- Can operating margin be negative?
- Yes — when operating expenses exceed gross profit, operating income and the margin are negative.
Read it with
The metrics read alongside this one, and the terms it is confused with.
- Gross margin vs net marginGross margin is revenue less only the cost of delivering it, as a share of revenue; net margin is what is left after every cost — operating expenses, interest and tax — as a share of revenue.Compare
- EBITDA vs operating incomeOperating income is profit after all operating expenses, depreciation and amortization included; EBITDA adds depreciation and amortization back, so it is always at least as large and ignores what the company's assets cost to use up.Compare
- Net margin calculatorNet margin is a profitability metric, calculated as Net income ÷ Revenue.Calculator
- EBITDA calculatorEBITDA is a profitability metric, calculated as Net income + interest + income taxes + D&A (≈ operating income + D&A with no other non-operating items).Calculator
- Contribution margin calculatorContribution margin is a profitability metric, calculated as (Revenue − Variable costs) ÷ Revenue.Calculator
- Operating marginOperating margin is a profitability metric, calculated as Operating income ÷ Revenue.Term
The formula is the one the glossary states, and the arithmetic is unit-tested. A ratio with nothing to divide by shows a dash — undefined is not zero. General information, not financial advice.