1. What is Operating Profit Margin (OPM)?

Definition: OPM measures what percentage of revenue becomes operating profit, showing a company's operational efficiency.

Purpose: It helps investors and managers assess profitability before non-operating items like taxes and interest.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( OPM \) — Operating Profit Margin (percentage)
• \( \text{Operating Profit} \) — Revenue minus operating expenses (dollars)
• \( \text{Revenue} \) — Total sales (dollars)

Explanation: The ratio shows how much profit is generated per dollar of revenue after paying variable costs.

3. Importance of Operating Profit Margin

Details: Higher OPM indicates better cost control and pricing power. It's crucial for comparing companies in the same industry.

4. Using the Calculator

Tips: Enter operating profit and revenue in dollars. Revenue must be greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What's a good operating profit margin?
A: Varies by industry, but generally 15%+ is good, 10% is average, and below 5% may indicate problems.

Q2: How is operating profit different from net profit?
A: Operating profit excludes interest and taxes, while net profit includes all expenses.

Q3: Can OPM be negative?
A: Yes, if operating expenses exceed revenue, indicating operational losses.

Q4: Why multiply by 100 in the formula?
A: To convert the decimal ratio into a percentage (e.g., 0.15 becomes 15%).

Q5: How often should OPM be calculated?
A: Typically quarterly for public companies, but monthly for internal management.