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Analysis question What are the meaning when total operating expense is 80 % of the revenue...

Analysis question

What are the meaning when total operating expense is 80 % of the revenue and when total operating expense is -80 percent of the revenue?

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Answer #1

The operating expense ratio (OER) is equal to a company's operating expenses divided by its revenues. The measure is very common in real estate analysis, whereby analysts are measuring the costs to operate a piece of property versus the income it generates.

Operating-Expense ratio is measured as a percentage, the lower the percentage the better the situation is for the business or farm. The Operating-Expense ratio shows the proportion of income that is being used to cover operating expenses not including the principal and interest of loans. The lower the percentages the better position a farm or business is. A number less than 60% means the business or farm is on strong footing while anything higher than 80% means the farm or business is going to be more easily vulnerable to changes in markets.

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