Saturday, November 7, 2009

Administrative Expenses Ratio

Accountants use expense ratios to examine how a particular cost will relate to sales. The Administrative expenses ratio can be used to examine how administrative costs relate to the company's earnings. 

Administrative expenses ratio = (Administrative expenses/ Net Sales) × 100 

The administrative expense ratio should be compared over a good period of time with the industry average as well as compared to similar companies that work in the industry.

Generally, a low ratio is a good indicator of the company's health and a high ration is a bad indicator. 

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