Operating costs and margins
Cost of sales, opex, EBITDA.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: operating costs and margins.Updated 30 September 2026
What it does
The lines between revenue and EBITDA. Cost of sales is usually a gross margin, operating expenses a share of revenue or a fixed-plus-variable build, and the result is the profit figure every multiple is quoted on. Depreciation sits below it and comes from the fixed-asset schedule, not from here.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 15–20: Base case gross margin, Upside case gross margin, Downside case gross margin, Gross margin (live)…
- Income Statement, rows 13–17: Operating expenses, EBITDA, EBITDA margin, Depreciation…
What a reviewer looks for
- Depreciation forecast as a share of revenue on the income statement while a PP&E schedule computes a different number.
- Margins that expand every year with nothing in the case to explain why.
Learn it, then build it
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Vocabulary: EBITDA.