A company has total sales of Rs. 2,000,000, cost of goods sold of Rs. 1,200,000, operating expenses of Rs. 500,000 and interest expenses of Rs. 100,000. What is the company’s operating profit margin?20%15%10%25%
Question
A company has total sales of Rs. 2,000,000, cost of goods sold of Rs. 1,200,000, operating expenses of Rs. 500,000 and interest expenses of Rs. 100,000. What is the company’s operating profit margin?20%15%10%25%
Solution
To calculate the operating profit margin, we first need to determine the operating profit. The operating profit is calculated as total sales minus cost of goods sold and operating expenses.
Here's the step-by-step calculation:
- Total Sales = Rs. 2,000,000
- Cost of Goods Sold (COGS) = Rs. 1,200,000
- Operating Expenses = Rs. 500,000
Operating Profit = Total Sales - COGS - Operating Expenses Operating Profit = Rs. 2,000,000 - Rs. 1,200,000 - Rs. 500,000 Operating Profit = Rs. 300,000
The operating profit margin is then calculated as (Operating Profit / Total Sales) * 100%.
Operating Profit Margin = (Rs. 300,000 / Rs. 2,000,000) * 100% Operating Profit Margin = 15%
So, the company's operating profit margin is 15%.
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