How this calculator works
Build operating income from revenue less cost of goods sold and operating expenses, or enter operating income directly. Include depreciation in operating expenses when your statement includes it there. Keep interest and income tax outside this subtotal. Negative operating income is allowed, but revenue must be positive.
Formula
OI = revenue - cost of goods sold - operating expenses. Margin = OI / revenue. From costs and a target margin, revenue = (cost of goods sold + operating expenses) / (1 - margin).
Worked example
Revenue of $100,000 less $50,000 of cost of goods sold and $30,000 of operating expenses leaves $20,000. Operating margin is 20%. Direct operating income of -$8,000 on $80,000 of revenue gives -10%.
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Frequently asked questions
Does operating margin include interest?
This model excludes interest and income tax. Check how your financial statement labels unusual or non-operating items.
Can I solve for revenue at a 100% margin?
The cost-based inverse has no unique solution at 100%. Positive costs cannot coexist with that margin.
Why compare firms in the same industry?
Cost structures vary. A margin can be useful over time even when it is not comparable with a different business model.