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Question
Higher the ratio, the more favorable it is. This does not apply to__________.
Higher the ratio, the more favorable it is. This does not apply to__________.
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Solution
The correct option is B Operating ratio
- Operating profit ratio is the ratio between operating profit and the net sales .Higher the ratio, higher would be the operating profit and it would be more favorable.
- Stock turnover ratio is the relationship between the COGS and the average inventory. It indicates how fast the inventory is sold or used. A high ratio is favorable from the point of view of liquidity and vice versa.
- ROI shows the returns made from the funds invested by the owners. A higher ratio is always preferred in case of returns.
- Operating ratio is the ratio of operating expenses to the net sales. Higher this ratio higher would be the operating expense and lower the operating profit. So a lower ratio is more favorable in terms of business.
- Operating profit ratio is the ratio between operating profit and the net sales .Higher the ratio, higher would be the operating profit and it would be more favorable.
- Stock turnover ratio is the relationship between the COGS and the average inventory. It indicates how fast the inventory is sold or used. A high ratio is favorable from the point of view of liquidity and vice versa.
- ROI shows the returns made from the funds invested by the owners. A higher ratio is always preferred in case of returns.
- Operating ratio is the ratio of operating expenses to the net sales. Higher this ratio higher would be the operating expense and lower the operating profit. So a lower ratio is more favorable in terms of business.
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