Formula
Operating Profit Margin = (Operating Income ÷ Revenue) × 100
Calculation Example
If a company generates $2,000,000 in revenue and has an operating income of $400,000, the margin is: (400,000 ÷ 2,000,000) × 100 = 20%
Data Source
Income statements, accounting reports
Tracking Frequency
Monthly, Quarterly, Annually
Optimal Value
Varies by industry, generally above 15% is considered strong.
Minimum Acceptable Value
Should remain positive; negative values indicate unprofitable operations.
Benchmark
Tech ~20-30%, retail ~5-10%, manufacturing ~10-15%
Recommended Chart Type
Bar chart (to compare operating performance), Line chart (to track trends)
How It Appears in Reports
Displayed as a percentage in financial statements for operational efficiency tracking.
Why Is This KPI Important?
Helps businesses understand how well they generate profit from operations, excluding external factors.
Typical Problems and Limitations
Ignores financial leverage and tax effects, may not reflect overall profitability.
Actions for Poor Results
Reduce overhead costs, streamline operations, increase operational efficiency.
Related KPIs
Net Profit Margin, EBITDA, Revenue
Real-Life Examples
A manufacturer improved efficiency by automating production, raising its operating margin from 12% to 18%.
Most Common Mistakes
Confusing with gross or net profit margin, not adjusting for unusual expenses.
