1. What is the Operating Profit Ratio?

The Operating Profit Ratio (OPR) is a key financial metric in management accounting that measures a company's operating efficiency and profitability. It shows what percentage of sales revenue remains as operating profit after accounting for all operating expenses.

2. How Does the Calculator Work?

The calculator uses the Operating Profit Ratio formula:

Where:

• \( Operating\ Profit \) — Earnings before interest and taxes (EBIT)
• \( Sales \) — Total revenue from sales
• \( OPR \) — Operating Profit Ratio expressed as percentage

Explanation: This ratio indicates how efficiently a company generates profit from its core operations, excluding non-operating income and expenses.

3. Importance of Operating Profit Ratio

Details: The OPR is crucial for assessing operational efficiency, comparing performance across companies and industries, and identifying trends in profitability over time. A higher ratio indicates better operational efficiency and cost control.

4. Using the Calculator

Tips: Enter operating profit and sales in USD. Both values must be positive numbers. Operating profit should be calculated as revenue minus cost of goods sold and operating expenses.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Operating Profit Ratio?
A: A good OPR varies by industry, but generally ratios above 15-20% are considered strong, while ratios below 5% may indicate operational inefficiencies.

Q2: How does OPR differ from net profit margin?
A: OPR focuses only on operating activities, excluding interest and taxes, while net profit margin includes all expenses and provides the bottom-line profitability.

Q3: Why is OPR important for investors?
A: Investors use OPR to evaluate a company's core operational efficiency and its ability to generate profits from regular business activities.

Q4: Can OPR be negative?
A: Yes, if operating expenses exceed sales revenue, resulting in an operating loss and negative OPR.

Q5: How often should OPR be calculated?
A: OPR should be calculated quarterly and annually to track operational performance trends and identify areas for improvement.