Far and above the most valuable liquidity ratio is the operating cash ratio. Unlike the other liquidity ratios that are balance sheet derived, the operating cash ratio is more closely connected to activity (income statement based) ratios than the balance sheet.
Operating Profit Margin
Operating profit margin is the profit as a percentage of sales after overhead (operational expenses) costs. It effectively calculates the profit as a function of the company’s primary purpose and not all sources of revenues and auxiliary costs.
Operating profit margin refers to the value earned as a percentage of net sales. The operating profit is often referred to as earnings before interest, taxes, depreciation and amortization, (EBITDA). This is a misleading reference as operating profit is actually defined differently by industry sector. EBITDA is used primarily in valuing businesses.