What is the operating profit margin formula?

Operating margin = operating income ÷ revenue × 100%, where operating income = revenue − COGS − operating expenses.

Is operating margin the same as EBIT margin?

Usually yes. Operating income and EBIT differ only when there are non-operating items such as investment gains.

What is a good operating margin?

It varies by industry; 10–20% is solid for many businesses.

Why is operating margin lower than gross margin?

Because it also subtracts operating expenses such as salaries, rent and marketing.

Operating Profit Margin Formula

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Operating Profit Margin Calculator

Operating profit margin shows how much of each unit of revenue is left after paying for both the goods sold and the costs of running the business, such as salaries, rent, marketing, research and depreciation. It divides operating income, also called EBIT, by revenue. Because it comes before interest and tax, it measures the performance of the business itself, independent of how it is financed or where it pays tax.

Formula

Operating margin = Operating incomeRevenue × 100% Operating income = Revenue − COGS − Operating expenses

Where

Operating income: profit from core operations before interest and taxes (EBIT)
COGS: cost of goods sold
Operating expenses: selling, general, administrative, R&D, depreciation

Calculator

Revenue

Cost of goods sold

Operating expenses

Result and step-by-step solution

Operating profit margin

16%

Operating income 80,000.00 on 500,000.00 of revenue.

Operating income
500,000.00 − 300,000.00 − 120,000.00 = 80,000.00
Divide by revenue
80,000.00500,000.00 = 16%

How to use the formula

The calculator builds operating income from revenue, cost of goods sold and operating expenses, so you can see how each layer eats into the margin. Comparing gross margin with operating margin tells you whether overheads are under control: a company can have a healthy gross margin and still lose money if its operating expenses are too high.

With revenue of 500,000, COGS of 300,000 and operating expenses of 120,000, operating income is 80,000 and the operating margin is 16%. The same company’s gross margin is 40%. Operating margin is also the EBIT margin used in the five-step DuPont analysis, and a key driver of operating leverage.

Frequently asked questions

What is the operating profit margin formula?: Operating margin = operating income ÷ revenue × 100%, where operating income = revenue − COGS − operating expenses.
Is operating margin the same as EBIT margin?: Usually yes. Operating income and EBIT differ only when there are non-operating items such as investment gains.
What is a good operating margin?: It varies by industry; 10–20% is solid for many businesses.
Why is operating margin lower than gross margin?: Because it also subtracts operating expenses such as salaries, rent and marketing.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.