Explain the operating profit margin - performance ratios, Financial Management

Assignment Help:

Operating profit margin

Operating profit margin    =   (PBIT / Turnover) x 100%

This is the ratio of operating profit to turnover or sales. A high operating profit margin is due higher sales prices or low costs. Other factors to consider comprise inventory valuation, bulk discounts, overhead allocation and sales mix.

Low profit margins aren't generally good news since it suggests poor performance. But there may be other factors to consider relating to business activities and industry. For illustration the company may be entering a new market which requires low selling prices.

 


Related Discussions:- Explain the operating profit margin - performance ratios

Risk-bearing economies of scale, a) Product portfolio refers to the diversi...

a) Product portfolio refers to the diversity of the different product lines produced by a business. In this case, Mattel's product portfolio includes: board games, toy cars, cuddly

Agency policy theorem, How might management try to solve the problems foun...

How might management try to solve the problems found in agency theorem

Advanced financial management, QUESTION 1 [25 marks] Xelo Ltd, whose curren...

QUESTION 1 [25 marks] Xelo Ltd, whose current sales consist of fixed operating costs of R140 000 and variable operating costs equal to 22% of sales, has made the following two sale

Sources of funds, What are sources of funds for an assignment?

What are sources of funds for an assignment?

Reasons for time preference of money, Q. Reasons for Time Preference of Mon...

Q. Reasons for Time Preference of Money? 1) Future Uncertainties: One of the reasons for preference for current money is that there is a certainty about it whereas the future

Explain the financial accounting techniques, Question 1: (a) Explain f...

Question 1: (a) Explain fully the following financial accounting techniques: i. Cash accounting ii. Accrual accounting iii. Fund accounting iv. B

Profitability ratios, Profitability Ratios   Profit Margin  ...

Profitability Ratios   Profit Margin  It is a measure of the profit margin of the company. This is important to gauge the financial position of the company.

Explain terminal value calculation at end of forcast period, Explain the te...

Explain the terminal value calculation at the end of the forecast period.  Why is it necessary? The firm whose business operation is being valued isn't expected to suddenly cea

Differentiate between a bull and a bear spread, Question 1: a) Describe...

Question 1: a) Describe fully why and how government intervenes in the foreign exchange market. b) "Changes in the equilibrium exchange rate between a pair of currencies rel

Determinants of working capital, Q. Determinants of Working Capital? D...

Q. Determinants of Working Capital? Determinants of Working Capital: - The working capital necessity is determined by a large number of factors but generally the following fa

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd