Operating Expenses Ratio

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:


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.