What is operating ratio?

Apr 19, 2021 at 12:52 PM CST
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, maintenance, and crew or employee costs, as well as toll expenses or maintenance-of-way costs. They also include equipment rentals.

Apr 19, 2021 at 12:52 PM CST

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, maintenance, and crew or employee costs, as well as toll expenses or maintenance-of-way costs. They also include equipment rentals.