A corporation's operating profit margin is equal to
A) Net Income divided by Sales.
B) EBIT divided by Sales.
C) EBIT divided by Net Income.
D) Sales divided by EBIT.

Question

Quizplus · Accepted Answer

The operating profit margin is the ratio of earnings before interest and taxes (EBIT) to sales. It shows the percentage of revenue that a company retains as operating profit after incurring all the expenses of doing business. Option A is the formula for the net profit margin, which includes all expenses and taxes. Option C is incorrect as EBIT and net income cannot be divided, as they are separate measures of profitability. Option D is the reciprocal of option B and does not provide accurate information about a company's profitability.

A Corporation's Operating Profit Margin Is Equal to