Question

A company has net sales of $438,500, operating expenses of $131,400, depreciation of $25,000, cost of...

A company has net sales of $438,500, operating expenses of $131,400, depreciation of $25,000, cost of goods sold of $218,000, and interest expense of $32,000. What's the operating margin? Question 2 options: A) 14.6% B) 13.8% C) 11.9% D) 12.2%

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Answer #1

Operating Margin:

The term operating margin refers to the determination of the profitability of a company from its operations based on sales. In other words this ratio shall provide us as how the company operation has performed and the impact of it in the profit of the company. This margin is calculated based on sales and operating expenses

Operating Expenses:

The operating expenses are such expenses which directly influence the working of the company. These are sure to be incurred in order to run the business. It is variable in nature and changes according to the operation of the business.

Net sales (A)= 438,500

Cost of Goods sold (B) = 218,000

operating expense

Operating exp = 131,400

Depreciation = 25,000

Total operating expense (C)= 156,400

Operating Income(D) = 64,100

(A-B-C)

Operating Margin = operating income / Sales

= 63,600/438,000

= 14.6%

option A is correct

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