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. 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 ...
  2. 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 ...
  3. 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 ...
  4. What is the difference between operating margin and profit margin?

    Understand the difference between operating margin and profit margin in relation to evaluating a company's profitability ...
  5. What are some examples of factors that will affect my profit margin?

    Dive into profit margin, and discover some of the many factors that can influence the profit margin for your company in a ...
  6. What is the difference between gross profit margin and net profit margin?

    Understand the difference between the two profitability measures, gross profit margin and net profit margin, and how to calculate ...
RELATED TERMS
  1. Operating Margin

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

    Marginal profit is the profit earned by a firm or individual ...
  3. Profitability Ratios

    A class of financial metrics that are used to assess a business's ...
  4. Cross Margining

    An offsetting position where market participants are able to ...
  5. Operating Cash Flow Margin

    A measure of the money a company generates from its core operations ...
  6. Gross Margin

    A company's total sales revenue minus its cost of goods sold, ...
Hot Definitions
  1. Efficient Frontier

    A set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a ...
  2. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the ...
  4. Border Adjustment Tax

    A tax levied on goods based on where they are sold – exported goods are exempt from tax; those imported and sold in the ...
  5. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  6. Blind Trust

    A trust in which the trustees have full discretion over the assets, and the trust beneficiaries have no knowledge of the ...
Trading Center