Operating Margin Calculator

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Operating Margin Calculator is a tool that computes the profit a firm makes after paying for variable costs of production but before paying interest or tax

Operating Margin:
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What does Operating Margin mean?
Operating margin is the measure of profitability and indicates how much of each dollar of revenues is left. Over after both costs of goods sold and operating, expenses are considered.
Formula
Operating Margin = Operating Earnings / Revenue
Example

Income Statement for Company XYZ, Inc.

Revenue$1,000,000
Costs of Goods Sold$500,000
Labor$300,000
General & Admin. Expenses$50,000
Operating Earnings$150,000

According to the formula, Operating Margin is:-

  • = $150,000 / $1,000,000
  • = 0.15 or 15%

This means that for every $1 in sales, the Company XYZ makes $0.15 in operating earnings.