Write the meaning and importance of operating profit ratio.

1.	Write the meaning and importance of operating profit ratio.
Answer» Operating Profit Ratio : Operating profit ratio measures the relationship between operating profit and revenue from operations i.e., net sales. Operating profit ratio is computed by dividing operating profit by revenue operations (net sales) and is expressed as percentage. In the form of a formula this ratio is expressed as follows: Operating Profit Ratio =\(\frac {\textit{Operating Ratio}}{\textit{Revenve from operations(Net sales)}} \times100\) Operating Profit = Gross Profit + Other Operating Income – Other Operating Expenses Or Net Profit (Before Tax) + Non-operating Expenses/Losses – Non-Operating Incomes Or Revenue from Operations – Operating Cost Objective and Significance : The objective of computing the ratio is to determine operational efficiency of the business. An increase in the ratio over the previous period shows improvement in the operational efficiency of the business enterprise.

Answer»

Operating Profit Ratio : Operating profit ratio measures the relationship between operating profit and revenue from operations i.e., net sales. Operating profit ratio is computed by dividing operating profit by revenue operations (net sales) and is expressed as percentage.

In the form of a formula this ratio is expressed as follows:
Operating Profit Ratio =\(\frac {\textit{Operating Ratio}}{\textit{Revenve from operations(Net sales)}} \times100\)

Operating Profit = Gross Profit + Other Operating Income – Other Operating Expenses Or Net Profit (Before Tax) + Non-operating Expenses/Losses – Non-Operating Incomes Or Revenue from Operations – Operating Cost
Objective and Significance : The objective of computing the ratio is to determine operational efficiency of the business. An increase in the ratio over the previous period shows improvement in the operational efficiency of the business enterprise.

Write the meaning and importance of operating profit ratio.

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