Financial modelling terms explained

# Operating Profit Margin

Operating profit margin is a ratio that shows how much profit a company makes after accounting for all operating expenses, such as cost of goods sold and sales, general, and administrative expenses. Operating profit margin is calculated by dividing a company's operating profit by its total sales.

## What is Operating Profit Margin?

Operating Profit Margin is a measure of a company's operating efficiency, calculated as Operating Profit divided by Revenue. It shows how much of each dollar of revenue is left over after paying for the company's operating costs. A higher Operating Profit Margin indicates that a company is more profitable relative to its revenue.

## Operating Profit Margin Formula Operating Profit Margin Examples Operating Profit Margin vs. Net Profit Margin?

Operating profit margin (OPM) is a measure of a company's operating efficiency. It is calculated by dividing operating income by net sales. OPM is used to assess a company's ability to generate profits from its operations.

An OPM of greater than 10% is considered good, while an OPM of less than 5% is considered poor.

Operating profit margin is also known as "operating income margin" or "operating profit ratio".

Some examples of how to calculate operating profit margin are:

Company A has net sales of \$100,000 and operating income of \$10,000. The operating profit margin is 10% (\$10,000/\$100,000).

Company B has net sales of \$1,000,000 and operating income of \$100,000. The operating profit margin is 10% (\$100,000/\$1,000,000).

Company C has net sales of \$10,000,000 and operating income of \$1,000,000. The operating profit margin is 10% (\$1,000,000/\$10,000,000).

Company D has net sales of \$100,000,000 and operating income of \$10,000,000. The operating profit margin is 10% (\$10,000,000/\$100,000,000).

Company E has net sales of \$1,000,000,000 and operating income of \$100,000,000. The operating profit margin is 10% (\$100,000,000/\$1,000,000,000).

Operating profit margin is different from net profit margin. Net profit margin is calculated by dividing net income by net sales. Net profit margin measures a company's overall profitability.

A net profit margin of greater than 10% is considered good, while a net profit margin of less than 5% is considered poor.

Some examples of how to calculate net profit margin are:

Company A has net sales of \$100,000 and net income of \$10,000. The net profit margin is 10% (\$10,000/\$100,000).

Company B has net sales of \$1,000,000 and net income of \$100,000. The net profit margin is 10% (\$100,000/\$1,000,000).

Company C has net sales of \$10,000,000 and net income of \$1,000,000. The net profit margin is 10% (\$1,000,000/\$10,000,000).

Company D has net sales of \$100,000,000 and net income of \$10,000,000. The net profit margin is 10% (\$10,000,000/\$100,000,000).

Company E has net sales of \$1,000,000,000 and net income of \$

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