Operating Margin Calculator
The operating margin calculator shows how much of every sales dollar your business keeps as operating profit before interest and tax. You enter your operating profit and your total revenue, and the tool returns your operating margin as a percentage. Operating profit, also known as EBIT, is what remains after the cost of goods sold and operating expenses such as rent, wages, marketing, and depreciation are deducted, but before financing costs and tax. Turning that profit into a margin makes it easy to compare performance across periods and against other businesses, because it removes the effect of size and focuses on efficiency. A high operating margin means the core business converts a good share of its sales into profit, while a thin or falling margin signals that costs are eating into revenue. A New Zealand business owner, manager, lender, or investor can use operating margin to judge how well the trading operation is run, independent of how it is financed or taxed. To get a meaningful figure, make sure operating profit and revenue cover the same period and that operating profit truly excludes interest and tax, since including them would distort the result. Watch the trend over several periods rather than reading too much into one, and compare against similar businesses in your industry for context. If the margin is slipping while revenue grows, your direct or operating costs are likely climbing faster than sales, which is worth investigating early. All figures are in New Zealand dollars and the result is an estimate to support decisions, not a substitute for advice from your accountant.
Operating margin = operating profit / revenue. Estimate only, not financial or tax advice.
How it works
Operating margin is operating profit divided by revenue, shown as a percentage. It tells you how many cents of each sales dollar the core business keeps before interest and tax. The defaults use $80,000 of operating profit and $500,000 of revenue.
Worked example
With operating profit of $80,000 and revenue of $500,000, dividing $80,000 by $500,000 gives 0.16. As a percentage that is a 16.0 percent operating margin.
Related calculators
- Operating Profit Calculator: operating profit in dollars.
- Net Profit Margin Calculator: margin after all costs.
- Gross Profit Margin Calculator: margin after direct costs.
- EBITDA Margin Calculator: margin before D and A.