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
Operating Profit = Revenue - COGS - Operating Expenses - Depreciation & Amortization
The operating profit margin is a useful metric for companies to benchmark against its industry competitors.