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Operating Profit Margin Rate

The operating the profit margin is the excess of gross profit from operating expenses.

Gross profit xxxxx

Less: Operating Expenses xxxxx

Operating profit margin xxxxx

The operating profit margin is the second level of revenue in the income statement. At this stage, not only the cost of buying or making the product that has been deducted is included but also the operating expenses. These are expenses incurred during a particular period only, and are not expected to provide benefits to any future period. The operating expenses are also period costs.

In case there are no financing charges like interest, expenses, and income tax, the amount of the operating profit margin is equal to the net income.

Gross profit P 157,000.00

Less: Operating expenses 90,000.00

Operating profit margin P 67,000.00

This information that the business realized an income of P 67,000.00 during the year after deducting the cost and operating expenses from the sales made.

By applying

The operating profit margin of the business measures the percentage of profit available after deducting the cost of sales & operating expenses of the business. A higher operating profit margin is favorable to the business.