Sample Thesis Paper
This ratio is calculated by dividing Operating Income by the Sales Revenue figure for the year. Operating Profit is the result of deducting operating expenses from the Gross Profit figure for the year. Operating expenses are normally all selling and general and administrative expenses.
The Cost of Sales or Cost of Goods Sold includes raw material and other costs of production, which are costs not completely under management control. However, the Operating Expenses are greatly a manifestation of management decision making. This ratio can give an indication to management decision making (Berman et al 2006). This ratio, like the other two profitability ratios is better for the company the higher the value of the ratio. Again, this ratio would require a comparison with industry averages and / or year wise data to better gauge the performance of the company.