# How high is my operating margin?

Computes operating margin, operating income as a percent of net revenue, from operating income or from revenue, cost of sales and operating expenses.

- Page: https://www.acalculator.org/finance/operating-margin-calculator
- JSON spec: https://www.acalculator.org/finance/operating-margin-calculator.json
- Version: 8bdc7510e1c6

## Default answer

Example with the default inputs (Start from Operating income, Net revenue $120,000.00, Operating income $43,000.00): Operating income of $43,000.00 on net revenue of $120,000.00 gives an operating margin of 35.83%.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| from | Start from | Operating income as reported, or net revenue with the cost of sales and operating expenses. |
| rev | Net revenue | Sales for the period after returns, allowances and discounts. |
| oi | Operating income | Income from operations, before interest and income tax. Negative for an operating loss. |
| cogs | Cost of sales | What the goods or services sold in the period cost to make or buy (cost of goods sold). |
| opex | Operating expenses | Selling, general and administrative costs, research, depreciation and other running costs. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| margin | Operating margin | Operating income ÷ net revenue × 100. |
| income | Operating income | Income from operations: as typed, or net revenue − cost of sales − operating expenses. |
| gross | Gross profit | Net revenue − cost of sales. Shown when you start from revenue and costs. |

## Method

Operating margin = operating income ÷ net revenue × 100. From revenue and costs: gross profit = net revenue − cost of sales, and operating income = gross profit − operating expenses.

## Assumptions

- Operating income is before interest and income tax, from the same income statement and period as the revenue.
- Net revenue is after returns, allowances and discounts.
- Arithmetic is exact on the typed decimals; the margin shows to 2 decimals and money to the cent, halves up.

## Worked examples

1. from = income, rev = $120,000.00, oi = $43,000.00 gives margin = 35.833333%, income = $43,000.00. Source: U.S. Securities and Exchange Commission, Beginners’ Guide to Financial Statements (Operating Margin = Income from Operations ÷ Net Revenues). https://www.sec.gov/about/reports-publications/beginners-guide-financial-statements; OpenStax, Principles of Finance, 5.1 The Income Statement (Clear Lake Sporting Goods: net sales $120,000 and $100,000, cost of goods sold $60,000 and $50,000, operating income $43,000 and $38,000). https://openstax.org/books/principles-finance/pages/5-1-the-income-statement: 43,000 ÷ 120,000 × 100 = 35.83%.
2. from = costs, rev = $120,000.00, cogs = $60,000.00, opex = $17,000.00 gives margin = 35.833333%, income = $43,000.00, gross = $60,000.00. Source: OpenStax, Principles of Finance, 5.1 The Income Statement (Clear Lake Sporting Goods: net sales $120,000 and $100,000, cost of goods sold $60,000 and $50,000, operating income $43,000 and $38,000). https://openstax.org/books/principles-finance/pages/5-1-the-income-statement: 120,000 − 60,000 = 60,000 gross profit.
3. from = income, rev = $100,000.00, oi = $38,000.00 gives margin = 38%. Source: U.S. Securities and Exchange Commission, Beginners’ Guide to Financial Statements (Operating Margin = Income from Operations ÷ Net Revenues). https://www.sec.gov/about/reports-publications/beginners-guide-financial-statements; OpenStax, Principles of Finance, 5.1 The Income Statement (Clear Lake Sporting Goods: net sales $120,000 and $100,000, cost of goods sold $60,000 and $50,000, operating income $43,000 and $38,000). https://openstax.org/books/principles-finance/pages/5-1-the-income-statement: 38,000 ÷ 100,000 × 100 = 38%.
4. from = costs, rev = $80,000.00, cogs = $50,000.00, opex = $36,000.00 gives margin = -7.5%, income = -$6,000.00, gross = $30,000.00.
5. from = income, rev = $9,876.54, oi = $1,234.56 gives margin = 12.499924%.

## FAQ

### What is operating margin?

Operating margin is operating income (income from operations) as a percent of net revenue. It shows how much of each dollar of sales is left after the costs of running the business, before interest and income tax.

### How do I calculate operating margin?

Divide operating income by net revenue and multiply by 100. Clear Lake Sporting Goods had operating income of $43,000 on net sales of $120,000, so its operating margin was 43,000 ÷ 120,000 × 100 = 35.83%.

### How is operating margin different from profit margin?

Operating margin uses operating income, before interest and income tax. Profit margin uses net income, after interest and tax. Clear Lake's net income of $35,000 gives a profit margin of 29.17%, below its 35.83% operating margin.

### How is operating margin different from gross margin?

Gross margin takes off only the cost of sales. Operating margin also takes off the operating expenses, such as salaries, rent, marketing and depreciation. Clear Lake's gross profit was $60,000, a gross margin of 50%.

### What is a good operating margin?

It depends on the industry, so compare a company with its own past years and with similar companies. The SEC's guide says desirable ratios vary by industry. A rising operating margin means each dollar of sales turns into more operating income.

### Can operating margin be negative?

Yes. When the cost of sales and operating expenses are more than revenue, operating income is a loss and the margin is negative. Net revenue of $80,000 with $86,000 of costs gives an operating margin of −7.5%.

## Sources

- U.S. Securities and Exchange Commission, Beginners' Guide to Financial Statements: operating margin = income from operations ÷ net revenues, usually shown as a percent; operating income is gross profit less operating expenses, before interest and income tax. https://www.sec.gov/about/reports-publications/beginners-guide-financial-statements (retrieved 2026-10-19)
- OpenStax, Principles of Finance, 5.1 The Income Statement: the Clear Lake Sporting Goods income statement (net sales $120,000 and $100,000, cost of goods sold $60,000 and $50,000, operating income $43,000 and $38,000). https://openstax.org/books/principles-finance/pages/5-1-the-income-statement (retrieved 2026-10-19)