# Operating Profit Margin Ratio

Operating profit margin ratio (OPMR) is a profitability ratio. It measures how much of each sales dollar remains after all costs, after interest, tax and preferred stock dividends are deducted. In other words it measures how efficiently a business manages its operations or how efficiently the firm manages its income statement (keeping a healthy balance between sales and costs).

Operating profit margin ratio (OPMR) = Operating Profit/Sales

# Example

For example, if ABC Company has operating profit of \$500,000 and sales of \$3,000,000 then Operating profit margin ratio (OPMR) is calculated as follows:

= 500,000/3,000,000

= 0.167 or 16.7%

# Test yourself

Dillon Corporation has operating profits of \$600,000 and sales of \$3,500,000.

Required: Find the Operating profit margin ratio (OPMR)

Solution:

The calculation of Operating profit margin ratio (OPMR) of Dillon Corporation will be as follows: OPMR = 600,000/3,500,000 OPMR = 0.17 or 17%

The higher the Operating profit margin ratio (OPMR) the better it is for the business.

## One thought on “Operating Profit Margin Ratio”

1. Steven N says:

Your explaination is very detail and easy. Thanks a lot.
Steven N