Q:
If ABC Company had the following Income Statement figures, what is the Operating Margin of ABC Company?
Net Sales = $1,000,000; Cost of Goods Sold = $400,000; Net Profit = $300,000; Depreciation = $100,000

A) 40 percent
B) 10 percent
C) 30 percent
D) 20 percent

A:
The correct answer is c):
The operating margin is a very useful test of the efficiency of corporate management. Operating margin is determined by dividing net profit into net sales. The only way to determine if a companies operating margin is good is to compare it to that of other companies in the same industry.

RELATED FAQS

  1. Should I look at a company's operating profit or net profit?

    Explore the ways in which investors and market analysts use a company's operating profit and net profit margins for equity ...
  2. What's the difference between profit margin and operating margin?

    Find out the differences between a company's gross profit margin, net profit margin and operating margin, and what each metric ...
  3. What types of financial margins should investors pay the most attention to before ...

    Learn what types of financial margins, such as profit and cash margins, an investor should pay the most attention to before ...
  4. Why does operating profit exclude interest revenues and expenses?

    Understand the purpose of examining a company's operating profit margin and why interest revenues and expenses are not included ...
  5. What is considered a healthy operating profit margin?

    Understand the concept and significance of operating profit margin, and learn what analysts consider to be a healthy margin ...
RELATED TERMS
  1. Operating Margin

    A ratio used to measure a company's pricing strategy and operating ...
  2. Profit Margin

    Profit margin is part of a category of profitability ratios calculated ...
  3. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  4. Marginal Profit

    Marginal profit is the profit earned by a firm or individual ...
  5. After-Tax Profit Margin

    A financial performance ratio, calculated by dividing net income ...
  6. Margin Debt

    1. The dollar value of securities purchased on margin within ...
Hot Definitions
  1. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  2. Sharpe Ratio

    The Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such ...
  3. Death Taxes

    Taxes imposed by the federal and/or state government on someone's estate upon their death. These taxes are levied on the ...
  4. Retained Earnings

    Retained earnings is the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested ...
  5. Demand Elasticity

    In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. ...
  6. Dark Pool

    A dark pool is a private financial forum or exchange for trading securities.
Trading Center