1. What is Operating Profit Ratio?

Operating Profit Ratio (OPR) is a profitability ratio that measures the percentage of operating profit earned from sales revenue. It indicates how efficiently a company generates profit from its core operations before interest and taxes.

2. How Does the Calculator Work?

The calculator uses the Operating Profit Ratio formula:

Where:

• \( Operating\ Profit \) — Profit from core business operations (Revenue - Operating Expenses)
• \( Sales \) — Total revenue from sales
• \( 100\% \) — Conversion to percentage format

Example: If a company has $50,000 operating profit and $200,000 in sales:
\[ OPR = \frac{50,000}{200,000} \times 100\% = 25\% \]

3. Importance of Operating Profit Ratio

Details: This ratio helps assess a company's operational efficiency and profitability from its core business activities. A higher ratio indicates better operational performance and cost management.

4. Using the Calculator

Tips: Enter operating profit and sales in any currency (ensure both values use the same currency). Both values must be positive numbers greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Operating Profit Ratio?
A: Generally, ratios above 15-20% are 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.

Q3: Can Operating Profit Ratio be negative?
A: Yes, if operating expenses exceed sales revenue, indicating operational losses.

Q4: Why is this ratio important for investors?
A: It helps investors evaluate a company's core operational efficiency and compare performance across companies in the same industry.

Q5: How often should this ratio be calculated?
A: Typically calculated quarterly or annually as part of financial statement analysis to track operational performance trends.