Question

Which profit margin measures the overall operating efficiency of the firm?

1) Return on equity
2) Operating profit margin
3) Net profit margin
4) Gross profit margin

Answer 1

The operating profit margin measures the overall operating efficiency of a firm by calculating the profit generated from core operations as a percentage of net sales revenue. Therefore, the most appropriate option is 2.

Step-by-step explanation:

The profit margin that measures the overall operating efficiency of a firm is the Operating profit margin. It shows how much profit a company generates from its core operations and indicates how well it manages its costs.

The operating profit margin is calculated by dividing the operating profit (which is the profit generated from main operations) by the net sales revenue and multiplying the result by 100 to express it as a percentage.

For example, if a company has an operating profit of $50,000 and net sales revenue of $500,000, the operating profit margin would be (50,000 / 500,000) * 100 = 10%.