Question

Operating ratio is:

• A. Profitability ratio
• B. Financial ratio
• C. Activity ratio
• D. None of these

Hint:

Operating Ratio = Operating Cost ÷ Sales → Lower ratio indicates better profitability.

Answer 1

The Correct Option is A

Step 1: Formula.
\[ \text{Operating Ratio} = \frac{\text{Operating Cost}}{\text{Net Sales}} \times 100 \]
Step 2: Nature.
Operating ratio shows the percentage of sales consumed by operating expenses. Lower ratio = higher profitability.
Step 3: Classification.
Since it measures efficiency of operations and profitability, it belongs to the category of Profitability Ratios.
Step 4: Conclude.
Hence, Operating ratio is a profitability ratio.
Final Answer: \[ \boxed{\text{Profitability ratio}} \]