Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting Ratios

Question:

What will be the total of operating ratio and operating profit ratio?

Options:

100%

80%

50%

75%

Correct Answer:

100%

Explanation:

Operating Profit Ratio = 100 – Operating Ratio
The operating ratio measures the portion of net sales that goes towards operating expenses, while the operating profit ratio measures the portion of net sales that represents the operating profit (profit from core business activities). Since operating expenses and operating profit are the two major components of a company's operations, their combined percentage is equal to 100% of the net sales.