What is operating ratio?

A photograph of a train locomotive and a truck trailer.Just what is operating ratio?

Operating ratio (OR) is a way for investors to compare the financials of one company against its peers. Investors use OR to gauge whether a company is generating sufficient profits. 

The formula to calculate OR is to divide a company’s operating expenses by its revenue. Put differently, it is one minus the operating margin percentage. For example, a 20% operating margin is the equivalent of an 80% operating ratio. Operating expenses include items such as fuel,...


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