When the ratio is low, the firm is said to have favourable indication.

The correct answer is Option (4) → Operating ratio

The operating ratio is (Cost of Revenue from Operations + Operating Expenses) ÷ Net Revenue from Operations × 100. It shows how much of every rupee of revenue is used up in running the business, so the lower it is, the larger the operating margin left over.

Option (1) Inventory turnover ratio — Incorrect. A low inventory turnover means stock moves slowly; it is a danger signal, not a good one.

Option (2) Operating profit ratio — Incorrect. The operating profit ratio (100 − operating ratio) should be high; a low figure means a thin margin.

Option (3) Debtors turnover ratio — Incorrect. A low debtors turnover means slow collection from customers, which is unfavourable.