Operating Profit Margin
Operating Income is taken when the SG&A, or selling, general, and administrative, is subtracted as expenses from a company’s gross profit number. The management usually has some more control over operating expenses as opposed to its cost of sales. This is why investors require the careful scrutiny of operating profit margins. Both positive and negative trends for this kind of ratio are mostly derived from the decisions of the management.
The operating income figure of a company is usually the favored measure, as it is more reliable. Preferred by investment analysts, this figure is usually chosen over its net income figure as it creates financial projections and inter-company comparisons.
Written by admin on April 14th, 2008 with
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