BUSINESS ADMINISTRATION
ACCOUNTING FOR MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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80
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50
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100
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90
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Detailed explanation-1: -This ratio indicates the portion remaining out of every rupee worth of sales after all operating costs and expenses have been met.it is better the higher ratio.
Detailed explanation-2: -Operating profit ratio + Operating ratio = 100%
Detailed explanation-3: -It is arrived at by dividing the sum of operating expenses and the cost of goods sold by the net sales. Operating ratio =(Operating Expenses+Cost of Goods Sold)/ Net Sales. A higher ratio would indicate that expenses are more than the company’s ability to generate sufficient revenue and may be considered inefficient.
Detailed explanation-4: -An operating ratio above 100 means that the company’s revenue is not sufficient to cover its operating expenses, much less have profit left over for debt service or to return to shareholders.
Detailed explanation-5: -Operating Profit Ratio = 100% − 82.59% = 17.41%