Operating margin: drag EBIT
Drag the bar to set EBIT. Sales stay put, so operating margin moves only because operating profit does. Raise EBIT and the margin rises. D&A is held still, so EBITDA margin is a wider figure on the same sales line.
Operating margin
20.0%
EBIT
$100,000,000
Sales stay at $500,000,000. D&A stays at $20,000,000, so EBITDA margin is 24.0 percent on this sheet. Illustrative arithmetic, not a rating or advice.
Sales
$500,000,000, held still so only EBIT moves the margin.
In short
- Drag the bar up for more EBIT and a higher operating margin.
- Read the rate as percentage points: 20, not 0.20.
- Watch sales stay put. Only the numerator is moving.
- Focus the handle and use the arrow keys to step EBIT.
EBIT over the sales line
Operating margin is EBIT divided by sales. How operating margin works is that identity, with the operating margin calculator under the answer.
EBITDA margin adds D&A in the numerator. Operating against net margin is a different firm.
D&A does not drag
This picture holds D&A still. EBITDA margin therefore sits above operating margin by a gap that shrinks as EBIT rises, because a fixed add-back is a smaller share of a larger profit.
After-interest is not this bar
Net margin takes interest and tax off. This picture stops at EBIT. It is educational material, not financial advice.
Common questions
Is 20 percent a target?
No. It is EBIT over sales on the teaching sheet. It is educational material, not advice.
Why is this not gross margin?
Gross margin stops at cost of goods. Operating margin is after operating expenses.
Can I drag sales instead?
Not here. The picture holds sales still so only EBIT moves the rate.
Keep reading
This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.