The operating margin (operating profit margin) calculator enables you to assess your operating margin. Have you ever wondered how to calculate your firm’s profit per product sold, the profitability of each sold product, or net income? With this calculator, you will be able to follow the whole process. Learning the process is quite easy and useful for any business owner. This tool will help you understand and calculate your business operating margin.

## Operating margin ratio

The operating margin ratio equates to the profitability ratio, which measures the percentage of the total revenue of operating income. It demonstrates how much revenue we have after compensating for all expenses related to the product. These leftover finances will cover other interests and taxes. The formula for operating margin ratio:

Operating\;margin\;ration\;=\frac{Operating\;income}{Net\;sales}

The operating margin ratio is the best indicator for any investor about the company’s support of operations. For instance, if the company in question needs income from multiple sources of their operational and non-operational businesses the operation is not sustainable. In a case that the company has an operating margin ratio of 20 percent. It means that after paying the expenses for all the costs of goods sold(COGS) only 20 percent is left to pay off other interests and taxes. In general, for every dollar of a sold product, after paying 80 percent on labor, raw material, and overhaul only 20 cents are left for other taxes. For most businesses, especially the small ones, a good operating margin ratio is 15 percent or higher.

## FAQ

What is a good operating margin?

The higher the operating margin, the better, indicating the company’s profitability. A good operating margin is 15 percent or higher.

Can operating margin be negative?

Yes, indeed, operating margins can be negative. If, for example, administrative costs and COGS are higher than revenues, then the company is losing money on such a product, and it has to find a new way to generate income.

How can a company improve its operating margin?

There are multiple ways to improve operating margins. For example, increasing prices, increasing sales, or having a better deal with their supplier for raw materials. Saving a percentage of costs for raw materials could make a significant difference.

What does operating margin measure?

The operating margin equates to the profit a company makes on a dollar of sales after accounting for administrative costs and all the costs directly involved with the production, but before interest and taxes.

What is the operating income margin?

Operating income margin(operating margin) is a measure, in percentages, of how much profit a company has after paying expenses that are directly related to the product. This profit is total gain before any taxes or interest.