Operating Ratios

Posted in Finance, Accounting and Economics Terms, Total Reads: 845

Definition: Operating Ratios

Ratios used in expense control, and in measuring the profitability and financial soundness of a firm, by expressing each operating statement item as a percentage of sales revenue.

The smaller the ratio, the greater the organization's ability to generate profit if revenues decrease

Examples: -

  • Operating expenses to sales ratio
  • Operating cash flow to sales ratio
  • Operating performance ratio

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