Operating Expenses Ratio

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Definition and Explanation:

Operating expenses ratio shows operating expenses as a percentage of sales. Operating expenses relate to the operations of a business entity. In other words, operating expenses include all administration and distribution expenses but do not include financial expenses and taxes. The ratio is calculated as:

Formula:

operating expenses ratio

Use of Operating Expenses Ratio: The lower operating expenses ratio is better as a higher ratio leaves a small amount of revenue for covering financial expenses and tax in case of companies.