Instructions: Use this calculator to find the OPM, GPM, and NPM of a company. Please input the desired values in the form below:
Following are key definitions of OPM, GPM, and NPM.
Definition of gross profit margin (GPM) finance
Gross profit margin (GPM) is calculated as gross profit divided by the revenue. This means how much a firm has earned in revenue after deducting the cost of goods sold (COGS). A higher the GPM means more profitability than a lower gross profit margin.
When a company has a competitive advantage in terms of price, product quality, and cost it means each item sold will return more. Thus, this will increase the firm ability to generate more profitability.
Definition of operating profit margin (OPM) finance
OPM operating profit margin is calculated as operating profit divided by revenue. Higher OPM means more profitability than a lower operating profit margin. The operating profit is measured by subtracting all operating expenses from the gross profit amount.
Definition of net profit margin (NPM) finance
Net profit is the remaining amount after subtracting all the operating expenses, interest, and taxes which illustrates the remaining amount left in the revenue in a given period. To calculate the net profit margin (NPM); the value of net income is divided by the revenue.
Conclusion
Profitability ratios are measured by using a firm’s profit and loss account or income statement. These are key ratios used to evaluate the firm profitability such as net profit margin (NPM); operating profit margin (OPM) and gross profit margin (GPM). This provides the basic financial analysis of the firm’s ability to turn its sales into profitability.