Operating Profit Calculator

Operating profit subtracts the costs of producing and selling goods or services from revenue, before financing costs and income tax. This calculator builds that subtotal from separate expense lines, then shows gross and operating margins. A further operating-profit-before-D&A result adds back depreciation and amortization, including any amount already embedded in another cost line.

How to use this tool

1. Enter revenue for the period — a month, quarter or year.
2. Enter the cost of goods sold.
3. Enter operating expenses without counting depreciation twice. Separate D&A is deducted; embedded D&A identifies an amount already inside another expense.
4. Read operating profit and margin, and use the table to see which costs take the biggest share of revenue.

Formula

Gross profit = Revenue − Cost of goods sold

Operating profit = Gross profit − SG&A − R&D − Depreciation & amortization − Other operating expenses

Operating margin = Operating profit ÷ Revenue × 100

Operating profit before D&A = Operating profit + Separate D&A + Embedded D&A

Use the same reporting period for every input. Embedded D&A must be part of the entered COGS or operating expenses and is added back only once. Classify unusual items according to your accounts: being one-off does not automatically make an expense non-operating. This simplified statement excludes financing and other non-operating items.

Example

A company has $500,000 of revenue and $300,000 of cost of goods sold, so gross profit is $200,000, a 40% gross margin. Operating expenses are $90,000 of SG&A, $20,000 of R&D, $15,000 of depreciation and $5,000 of other costs — $130,000 in all. Operating profit is $70,000, an operating margin of 14%, and operating profit before D&A is $85,000. If that $15,000 D&A was instead included in SG&A, enter SG&A of $105,000, separate D&A of zero and embedded D&A of $15,000 to obtain the same results.