Operating Profit Margin

The Operating Profit Margin will illustrate to you how efficiently the managers of a firm are using business operations to generate profit. This ratio also shows the success rate of these managers. The formula for Operating Profit Margin is: Formula: Operating Profit Margin = Earnings before Interest & Taxes / Sales

For example, consider a firm that has $2 million sales this year and an EBIT (Earnings before Interest & Taxes)

of $450,000. What is the Operating Profit Margin?

Operating Profit Margin = 450,000 / 2,000,000
Operating Profit Margin = 22.5%