What is Operating Profit Margin?
Operating profit margin is the percentage of revenue that remains as operating profit after deducting cost of sales and operating expenses, but before interest and tax. It measures core operational efficiency.
How It Works
- Compute operating profit (revenue – COGS – operating expenses).
- Divide by revenue and multiply by 100.
- Compare against historical and peer benchmarks.
Saudi Context
Saudi listed companies disclose operating margin in MD&A sections. Margins vary widely by sector — petrochemicals 20%+, telecom 25%+, retail 6 to 10%.
Example
A Saudi company with SAR 200 million revenue and SAR 30 million operating profit has a 15% operating margin.