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Today we will learn about Operating Profit Ratio .
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.
formula to Calculate Operating Profit Ratio
Operating Profit = Net profit before taxes + Non-operating expenses – Non-operating incomes.
Operating Profit = Gross profit + Other Operating Income – Other operating expenses.
Revenue From Operations (Net Sales) = (Cash sales + Credit sales) – Sales returns.

A higher operating margin indicates that the company is earning enough money from business operations to pay for all of the associated costs involved in maintaining that business. For most businesses, an operating margin higher than 15% is considered good.
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.

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