# Operating Profit Margin Ratio

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. Furthermore, it is the return achieved from standard operations and does not include unique or one time transactions. Terms used to describe operating profit margin ratios this include the following:

## Operating Profit Margin Formula

In order to calculate the operating profit margin ratio formula, simply use the following formula:

Operating profit margin = Operating income ÷ Total revenue

Or = EBIT ÷ Total revenue

(NOTE: Want the Pricing for Profit Inspection Guide? It walks you through a step-by-step guide to maximizing your profits on each side. Get it here!)

## Operating Profit Margin Calculation

The operating profit margin calculations are easily performed, including the following example.

Operating Income = gross profit – operating expenses

For example, a company has \$1,000,000 in sales; \$500,000 in cost of goods sold; and \$225,000 in operating costs. In conclusion, operating profit margin = (1,000,000 – 500,000 – 225,000)= \$275,000 / 1,000,000 = 27.5%

In conclusion, this company makes \$0.275 before interest and taxes for every dollar of sales.

If you want to learn how to price profitably, then download the free Pricing for Profit Inspection Guide.

Strategic CFO Lab Member Extra

Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.

Click here to access your Execution Plan. Not a Lab Member?

## Resources

For statistical information about industry financial ratios, please go to the following websites: www.bizstats.com and www.valueline.com.

### One Response to Operating Profit Margin Ratio

1. Leslie Julius March 31, 2018 at 11:52 am #

This website is just awesome. I’ve looked these info a long time and I
realised that is good written, fast to understand.
I congratulate you because of this research that I’ll tell to people friends.
I request you to visit the gpa-calculator.co site where each university
student or university student can calculate ratings grade point average levels.
All good!

This site uses Akismet to reduce spam. Learn how your comment data is processed.

See Dates