How to Calculate Operating Profit Margin

Now that tax season is over, it’s time to turn your attention back to getting your business in good financial shape. If you’re not already familiar with how to calculate your operating profit margin, here’s what to do.

An income statement measures a company’s financial performance. Towards the end of an income statement, the operating income will be listed. To determine the margin as a percentage, take the operating income before taxes and divide it by sales.

Compare this percentage to prior periods to create a context in which to interpret how you’re currently doing. You can also compare it to financial forecasts for your company, as well as to how other companies in the industry are doing.

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About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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