What is operating ratio? What does it indicate?

What is operating ratio? What does it indicate?


Operating Ratio indicates the percentage of net sales which is absorbed by the operating costs. A low operating ratio will always be desirable, as smaller the ratio, greater the organization’s ability to generate profit if revenue decreases. It indicates the operational efficiency of the business.

Formula to calculate Operating Ratio = {(Manufacturing cost of goods sold + Operating Expenses)/ Net Sales} X 100
What do you mean by Return on Assets? What does it indicate?
Return on Assets (ROA) measures the profitability of the investments in a firm. It is an indicator of the profitability…
What do you mean by Return on Capital Employed? What does it indicate?
Return of Capital Employed (ROCE) is one of the ratios of overall profitability group, which measures the profitability…
What is Return on Shareholder s funds? What does it show?
Return on Shareholders’ Funds is one of the ratios of overall profitability group, which indicates the profitability …
Post your comment