This illustrated glossary uses Visual Finance™ to provide a contextualized 'big picture' view of financial results. The examples feature data for the Round Number Company—a 'made-up company' with simplified figures. The Appendix presents an explanation of how to read Visual Finance as well as the financial statements and VF views for the Round Number Company.
Ratio: (Cost of Sales (COS) + Operating Expense) as a percentage of Sales.
Example: The Round Number CompanySales = 200; COS = 80; OpEx = 72 Operating Ratio = (80 + 72) / 200 = 152/200 = 76 % |
The Operating Ratio is a comprehensive measure of a company's operational efficiency.
Lower ratios are generally favorable, indicating better cost management and higher efficiency in generating profit from sales.
The terms Operating Ratio and OpEx Ratio sound similar - but they are different measurements!
The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"
term list.