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 The Operating Profit Percentage
reveals the return from standard operations, excluding the impact
of extraordinary items and other comprehensive income. It shows the
extent to which a company is earning a profit from standard operations,
as opposed to resorting to asset sales or unique transactions to post an
'artificial' profit.
Calculation of the Operating Profit Percentage
is straightforward: subtract the costs of goods sold, as well as all
sales, general, and administrative expenses, from sales. Divide the
result by sales.
To obtain a percentage that is related
strictly to operational results, be sure to exclude interest income
and expense from the calculation, since these items are related to a
company's financing decisions rather than its operational
characteristics.
Expense totals used in the
Operating Profit Percentage ratio should exclude extraordinary
transactions, as well as asset dispositions, since they do
not relate to continuing operations.
Compare with Operating Profit Percentage:
Gross Profit Percentage
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