Operating Income Calculator

How it is calculated

Operating income is what remains of revenue after the direct cost of sales and the running costs of the business. Gross profit = R − COGS, Operating income = Gross profit − OpEx and Margin = Operating income / R × 100. R is revenue for the period, COGS is cost of goods sold and OpEx is operating expenses such as rent, salaries and marketing, all in the same currency and for the same period. Interest and income tax are not part of the formula. All three fields are required; revenue must be above zero, and costs may be zero but not negative. A loss is allowed and is shown with a minus sign, so the margin can also be negative. Amounts display in US dollars.

Common mistakes

• Leaving out cost of goods sold and typing 0. Without it the operating income equals revenue minus OpEx only, which hides the cost of what you sold and inflates the margin.
• Counting the same expense twice, once in COGS and once in operating expenses. Direct production costs belong in COGS and overhead belongs in OpEx.
• Including interest, loan payments or income tax in operating expenses. Operating income is meant to be before them, and they would understate it.
• Entering a loss as a negative cost. Costs must be zero or positive, so a cost greater than revenue is entered as the real amount, and the result will show a negative income.
• Using different periods, such as annual revenue with monthly rent. All three figures need to cover the same time span.