How do you calculate the operating profit margin?
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Moreover, how do you calculate operating profit margin ratio?
To calculate a company's operating profit margin ratio, divide its operating income by its net sales revenue:
- Operating Profit Margin = Operating Income / Sales Revenue.
- Operating Income (EBIT) = Gross Income - (Operating Expenses + Depreciation & Amortization Expenses)
Also, how do you calculate profit margin? To find the margin, divide gross profit by the revenue. To make the margin a percentage, multiply the result by 100. The margin is 25%. That means you keep 25% of your total revenue.
Moreover, what is a good operating profit margin?
Operating margin is widely considered to be one of the most important accounting measurements of operational efficiency. For example, an operating margin of 8% means that each dollar earned in revenue brings 8 cents in profit. Whether or not that 8-cent figure is a good operating margin is mostly relative.
What affects operating profit margin?
The operating profit margin ratio indicates how much profit a company makes after paying for variable costs of production such as wages, raw materials, etc. It is also expressed as a percentage of sales and then shows the efficiency of a company controlling the costs and expenses associated with business operations.