Explanation of Operating Profit Percentage:

The Operating Profit Percentage measures how much of a profit the company is generating from their main operations.  Subtracting the Cost of Goods Sold and General and Administration expenses from the Net Sales reveals estimated operating expenses. 

Importance of Operating Profit Percentage:

This ratio uncovers situations where companies are relying on actions other than operations to generate an income.  Investing activities and sales of assets generate revenue, but these actions are not usually sustainable and regular as maintaining a steady flow of sales.  A high, or increasing Operating Profit Percentage is usually a positive sign, showing the company is increasingly able to generate sales from its operations.

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