Which ratio measures a company's ability to generate operating income from its sales?a.Gross profit marginb.Operating profit marginc.Net profit margind.Return on assets ratio
Question
Which ratio measures a company's ability to generate operating income from its sales?a.Gross profit marginb.Operating profit marginc.Net profit margind.Return on assets ratio
Solution
The ratio that measures a company's ability to generate operating income from its sales is the Operating profit margin. This ratio is calculated by dividing operating profit by net sales. It shows how much profit a company makes on a dollar of sales, after paying for variable costs of production such as wages and raw materials, but before paying interest or tax.
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