The cost of goods sold is added to operating expenses to determine the operating ratio. The gross margin tells us how much profit a company makes on its cost of sales or COGS. In other words, it indicates how efficiently management uses labor and supplies in the production process. The total operating expenses consist of two […]
Category Archives: Bookkeeping
Operating Ratio: Definition and Formula for Calculation
Analysts look at operating ratios over several time periods to spot trends. Comparing current ratios to historical norms also offers perspective on how efficiently the company is running. Using consistent time periods, such as the last twelve months, allows for reliable apples-to-apples comparisons. Multi-period trends in operating ratios help determine ideal investment entry and exit […]