Operating Ratio
The term operating ratio is borrowed from the common term we know of operations. Operations of course entails operating expenses. Unlike net profit ratio whose numerator is operating profits, in this case we move a notch higher to look at levels of specific operating expenses and how they relate to sales.
Generally, the formula of operating ratio can be expressed as;
Operating Ratio=
About the Author - Dr Geoffrey Mbuva(PhD-Finance) is a lecturer of Finance and Accountancy at Kenyatta University, Kenya. He is an enthusiast of teaching and making accounting & research tutorials for his readers.
