The operating profit margin measures a company's operational efficiency, expressed as a percentage. It is calculated by subtracting operating expenses from net sales, dividing this number by net sales and then multiplying by 100%.
For example, a manufacturer earns $3 million in revenue and has $2.1 million in total operating expenses (including cost of goods, salaries, and overhead), producing an operating profit of $900,000 and an operating profit margin of 30% — a healthy figure the company uses to benchmark against industry peers.
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