Operating profit margin

Method of calculation

Ratio's description

This ratio allows to estimate the relationship between the profit on sales and the total of operating revenues. Consequently it allows to estimate which part of the operating revenues is used to cover the costs of sold products, goods and materials (operating costs).

Ratio's interpretation

• The greater the ratio's value, the greater the operating profitability, since the costs of basic operating activities consume smaller part of the operating revenues.
• When assessing the changes in ratio's value over time (over few periods):
  • the increase of ratio's value is assessed positively and interpreted as an improvement of profitability,
  • the decrease of ratio's value is assessed negatively and interpreted as a deterioration of profitability.