Overview

Operating profit margin, also referred to as EBIT (short for earnings before interest and tax) margin, is a profitability ratio that determines the percentage of a company's profit generated from operations before paying taxes and interest expenses. The formula for calculating the EBIT margin is:

EBIT Margin = Operating Profit / Total Revenue

Where

Operating Profit = Revenue - COGS - Operating Expenses - Depreciation & Amortization

The operating profit margin is a useful metric for companies to benchmark against its industry competitors.

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