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The operating ratio can be used to determine the efficiency of a company's management by comparing operating expenses to net sales. It is calculated by dividing the operating expenses by the net sales. The smaller the ratio, the greater the organization's ability to generate profit. The ratio does not factor in expansion or debt repayment. [2]
A good operating margin is needed for a company to be able to pay for its fixed costs, such as interest on debt. A higher operating margin means that the company has less financial risk. Operating margin can be considered total revenue from product sales less all costs before adjustment for taxes, dividends to shareholders, and interest on debt.
A fund with a high expense ratio could cost you 10 times – maybe more! – what you might otherwise pay. ... While operating expenses can vary for mutual funds, the expense ratio tends to be ...
The efficiency ratio indicates the expenses as a percentage of revenue (expenses / revenue), with a few variations – it is essentially how much a corporation or individual spends to make a dollar; entities are supposed to attempt minimizing efficiency ratios (reducing expenses and increasing earnings). The concept typically applies to banks.
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TA Productivity = throughput / operating expense = T/OE; Investment turns (IT) = throughput / investment = T/I; These relationships between financial ratios as illustrated by Goldratt are very similar to a set of relationships defined by DuPont and General Motors financial executive Donaldson Brown about 1920. Brown did not advocate changes in ...
Net Operating Income = Adj. EBITDA = (Gross Operating Revenue) − (Operating Expenses) Debt Service = (Principal Repayment) + (Interest Payments) + (Lease Payments) [3] To calculate an entity's debt coverage ratio, you first need to determine the entity's net operating income (NOI). NOI is the difference between gross revenue and operating ...
3. Prioritize the Payout Ratio. The payout ratio, which represents the proportion of earnings paid out as dividends, is a critical metric to monitor. A high payout ratio might indicate that a ...