Operating Profit Margin

The operating profit margin represents what are often called the pure profits earned on each sales dollar. It is calculated as follows:

Operating profit margin = Net operating income
Sales

For Jimco operating profit margin for 1993 is

$4,000,000 = .0784, or 7.84%
$51,000,000

industry average = 5.47%

Net Profit Margin

The net profit margin measures the percentage of each sales dollar remaining after all expenses, including taxes, have been deducted. It is calculated as follows:

Net profit margin = Net income after taxes
Sales

For Jimco's the net income margin for 1993 is:

$6,580,000 = .129, or 12.9%
$51,000,000

industry average = 16.13%


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Finance For Strategic Management
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