The Operating Expense to Sales Ratio displays in a ratio format a company's operating expenses as a percent of its total net revenues, most often per quarter.
Formula for the Operating Expense to Sales Ratio
Total Overhead Cash Expense / Net Revenues
This ratio is considered a measure of the
total overhead used in the manufacturing firm per
net sales revenue dollar
The most important information revealed by this formula is the efficiency of a company's overall cost structure and it also indicates the ability of its business operations to convert income to profit.
For example, a company experiencing larger and more stable cash flows can sustain a higher operating expense to sales ratio than a smaller company with much less stable operations.
Management can use the information gained from this ratio in order to manage cost and ensure the long term profitabilty of a company.
Other Financial Ratios:
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