How a company could have a decreasing gross profit margin but an increasing operating profit margin?

Thus, a decreasing gross profit margin could be obtained when there is high amount of cost of goods sold. This means that the cost of goods sold ratio is high but the operating expenses are lower, thus, resulting in increasing trend of operating profit margin.

Is 20 a good gross profit margin?

A good margin will vary considerably by industry and size of business, but as a general rule of thumb, a 10\% net profit margin is considered average, a 20\% margin is considered high (or “good”), and a 5\% margin is low.

What does operating profit margin tell you about a company?

The operating margin measures how much profit a company makes on a dollar of sales after paying for variable costs of production, such as wages and raw materials, but before paying interest or tax.

How can profit margin be higher than operating margin?

It is possible to have net margin more than operating margin in cases where company’s non-operating revenues are more than the sum of interest and tax. Non-operating revenues include gain on foreign exchange due to currency fluctuation, interest & dividend income and gain on sale of capital assets etc.

What is a good profit margin for a manufacturing business?

The average manufacturer’s gross profit percentage varies between 25 percent and 35 percent. However, items with more expensive price tags, such as motor homes, automobiles, and even houses, have markup prices of only 10 to 15 percent.

What affects operating profit margin?

Quantitative Factors The most obvious, easily identifiable and broad numbers that affect your profit margin are your net profits, your sales earnings, and your merchandise costs. On your income statement, look at net revenues and cost of goods sold for a very general view of these major variables.

What affects operating profit?

Operating profit is the profitability of the business, before taking into account interest and taxes. To determine operating profit, operating expenses are subtracted from gross profit. Operating profit is a key number for managers to watch as it reflects the revenue and expenses that they can control.