Operating Ratio Income Statement

In this tutorial i ll teach you 7 important income statement ratios that you need to know when analyzing an income statement.

Operating ratio income statement. Many businesses are now letting a specialized team handle management from anything to marketing sales to analytics. These ratios usually measure the company s ability in utilizing its capital and assets in order to generate sales and profit. Income statement ratios are the ratios that analyze the company s performance in the market during a period of time. These ratios are widely used by large institutional investors to small retail investors.

Accounting students can take help from video lectures handouts helping materials assignments solution on line quizzes gdb past papers books and solved problems. Operating ratio is computed as follows. Operating income is the income reported in the income statement of the company before taking account of the interest and taxation. It is also called the operating cost ratio or operating expense ratio.

Income statement ratios formula and example definition. The operating ratio formula is the ratio of the company s operating expenses to net sales where operating expenses include administrative expenses selling and distribution expenses cost of goods sold salary rent other labor costs depreciation etc. Financial ratios are used to compare companies within the same industry. Operating ratio also known as operating cost ratio or operating expense ratio is computed by dividing operating expenses of a particular period by net sales made during that period like expense ratio it is expressed in percentage.

Operating expense ratio the operating expense ratio oer is used in the real estate industry and is a measurement of what it costs to operate a property compared to the income. These ratios are derived from income statements. Operating cost is equal to cost of goods.