Operating Profit Percentage

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Determining the return from standard operations. Explanation of Operating Profit Percentage.

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Operating Profit Percentage

What is Operating Profit Percentage? Definition


The Operating Profit Percentage reveals the return from standard operations, excluding the impact of extraordinary items and other comprehensive income.

It shows the extent to which a company is earning a profit from standard operations. As opposed to resorting to asset sales or unique transactions to post an 'artificial' profit.


 

Calculation of the Operating Profit Percentage. Formula


Calculation of the Operating Profit Percentage is straightforward: subtract the costs of goods sold, as well as all sales, general, and administrative expenses, from sales. Divide the result by sales.



To obtain a percentage that is related strictly to operational results, be sure to exclude interest income and expense from the calculation, since these items are related to a company's financing decisions rather than its operational characteristics.



Expense totals used in the Operating Profit Percentage ratio should exclude extraordinary transactions, as well as asset dispositions, since they do not relate to continuing operations.


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Compare with Operating Profit Percentage:  Gross Profit Percentage


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