Enter the total operating income and the total revenue into the calculator to determine the total operating margin.
Operating Margin Formula
The following formula is used to calculate an operating margin of a particular business or business section.
OPM = OI / R
- Where OPM is the operating margin
- OI is the operating income
- R is the total revenue
To calculate the operating margin, divide the operating income by the total revenue.
Operating Margin Definition
An operating margin, much like a net margin, is a measure of the profitability of a company. It’s a ratio of the core operating income to the total revenue. In other words, how profitable the core operations are in comparison to the total revenue.
The following example problem is a guide for calculating an operating margin.
How to calculate operating margin?
- First, determine the total operating income.
This is the total income generated from the core operations of a business.
- Next, determine the revenue.
Calculate or measure the total revenue of the business. This includes both operating revenue and outside revenue.
- Finally, calculate the operating margin.
Using the formula above, calculate the operating margin.