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Operating Profit Margin

The Operating Profit Margin is a fairly simple calculation meant to provide a business with an understanding of how much profit is earns relative to the cost of operations. Calculating this metric requires simply dividing the operating profit by the total organization revenue.

Operating Profit Margin Calculator


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Income Statement
201620172018
Revenue102007142341150772
Cost of Goods Sold (COGS)390235265456710
Gross Profit62984
89687
94062
Expenses
Salaries and Benefits26427
23002
25245
Rent and Overhead10963
11020
11412
Depreciation & Amortization195001654416080
Operating Expenses
568905056652737
Operating Profit60943912241325
Operating Profit Margin6%27%27%

FAQ


What is a good operating profit margin?

A good margin varies significantly by industry, but start with 5% as low, 10% is average and 20% is strong operating profit margin, which you should modify relative to competitor performance.

How do you calculate operating profit margin?

In order to calculate Operating Profit Margin, divide the operating profit by the total revenue.

What does high operating profit margin mean?

Having a high operating profit margin means that the company has lower financial risk because they have excess cash flow in order to pay for fixed costs, debt obligations, or invest in growth.

How do you calculate operating profit ratio?

To calculate operating profit ratio, simply divide the operating profit by the total revenue.

What is a good operating profit ratio?

A good operating profit ratio differs significantly from industry to industry, however there are some general rules of thumb. Obviously, a positive operating profit ratio is good. However, a simple split would be 5, 10 and 20% as week, normal and strong.

What does operating profit include?

The operating profit includes all income from the company before interest, taxes, and any other expenses are calculated.

How do I calculate operating profit margin?

To calculate operating profit margin, simply divide operating profit by total revenue.

What is the operating profit margin ratio?

The Operating Profit Margin is the measure of profit an organization produces from its operations, prior to deducting taxes and interest charges and is calculated by merely dividing the operating profit by total revenue.

What is a good operating margin percentage?

While in general the higher the operating margin percentage the better, in reality anywhere between 15 and 20% is considered a healthy operating profit margin.

How do you calculate net profit margin?

To calculate your net profit margin, divide your net income by your total sales revenue. The result is your net profit margin. You can multiply this number by 100 to get a percentage.

Why do we calculate net profit margin?

Net profit margin measures how much net income is generated as a percentage of revenues received. Net profit margin helps investors assess if a company's management is generating enough profit from its sales and whether operating costs and overhead costs are being contained.Feb 26, 2021

How do you calculate net profit margin and net loss?

Divide the net loss by total sales to derive the extent of the loss. Because there is a net loss, the profit margin calculation is irrelevant. For example, the profit margin calculation is -10 percent if the company reports a loss of $20 million on sales of $200 million ($-20 million divided by $200 million).

What is a good net profit margin ratio?

A good margin will vary considerably by industry and size of business, but as a general rule of thumb, a 10% net profit margin is considered average, a 20% margin is considered high (or “good”), and a 5% margin is low.Feb 5, 2021

How do you interpret operating profit margin?

Operating Profit Margin is a profitability or performance ratio that reflects the percentage of profit a company produces from its operations, prior to subtracting taxes and interest charges. It is calculated by dividing the operating profit by total revenue.

Is a higher or lower operating margin better?

Higher operating margins are generally better than lower operating margins, so it might be fair to state that the only good operating margin is one that is positive and increasing over time. Operating margin is widely considered to be one of the most important accounting measurements of operational efficiency.Jun 25, 2019

What does operating margin tell you about the organization?

An operating margin is an important measurement of how much profit a company makes after deducting for variable costs of production, such as raw materials or wages. ... A high operating margin is a good indicator a company is being well managed and is potentially less of a risk than a company with a lower operating margin.Feb 5, 2020

Is a high operating profit margin good?

Higher operating margins are generally better than lower operating margins, so it might be fair to state that the only good operating margin is one that is positive and increasing over time. Operating margin is widely considered to be one of the most important accounting measurements of operational efficiency.Jun 25, 2019

Why does operating profit margin increase?

Operating margin can improve through better management controls, more efficient use of resources, improved pricing, and more effective marketing. In its essence, operating margin is how much profit a company makes from its core business in relation to its total revenues.

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