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Definition

Operating ratios

Operating ratios– the ratios of selected operating statement items to net sales. These ratios let marketers compare the firm’s performance in one year to that in previous years (or with industry standards and competitors performance in that year). The most commonly used operating rations are gross margin percentage, the net profit percentage, and the operating expense percentage. The inventory turnover rate and return on investment (ROI) are often used to measure managerial effectiveness and efficiency.

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