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Definition: Operating Profit Percentage
A company’s profit can be divided into two parts- Operating Profit and Non-Operating Profit. Operating profit is the profit realized due to a company’s main operations. Non-operating profit is due to investment activities, sales of assets etc. But these actions cannot be continued regularly and for a very long time.
Operating profit percentage is one of the indicators of profitability. It shows how much operating profit is realized due to sales. A high operating profit is good for a company. It shows that the company is able to generate sales from its operations.
The formula for calculating Operating Profit Percentage is:
Operating profit percentage = (operating profit/ Net Sales) *100
Operating Profit = Net Sales – (Cost of Goods Sold + Sales, General and Administrative expenses)
For Company A, net sales = 10,0000 Cr. Cost of Goods Sold = 5000 cr. Sales, General and administrative expense = 500 Cr. Then Operating Profit Percentage can be calculated as:
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