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Operating Profit Ratio Formula:
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The Operating Profit Ratio (OPR) is a financial metric that measures a company's operating efficiency and profitability by expressing operating profit as a percentage of sales revenue. It indicates how much profit a company makes from its core operations before interest and taxes.
The calculator uses the Operating Profit Ratio formula:
Where:
Explanation: The formula calculates what percentage of sales revenue remains as operating profit after deducting all operating expenses.
Details: This ratio is crucial for assessing a company's operational efficiency, comparing performance across periods and competitors, and making informed investment decisions. A higher ratio indicates better operational efficiency and profitability.
Tips: Enter operating profit and sales revenue in the same currency units. Both values must be positive, with sales greater than zero for valid calculation.
Q1: What is considered a good Operating Profit Ratio?
A: Generally, a ratio above 15-20% is considered good, but this varies by industry. Higher ratios indicate better operational efficiency.
Q2: How is Operating Profit different from Net Profit?
A: Operating profit excludes interest and taxes, focusing only on core business operations, while net profit includes all expenses and income.
Q3: Can the ratio be negative?
A: Yes, if operating expenses exceed sales revenue, resulting in an operating loss and negative ratio.
Q4: How often should this ratio be calculated?
A: Typically calculated quarterly and annually for financial analysis and performance tracking.
Q5: What factors can affect the Operating Profit Ratio?
A: Cost control, pricing strategies, sales volume, operational efficiency, and industry competition all impact this ratio.