The operating expenses to sales ratio gives an indication of the efficiency of the cost structure of your business.
Use information from your business' annual profit and loss statement to input into the calculator.
For information on using this calculator see below.
The operating expenses to sales ratio provides an efficiency measure of the cost structure of a business. It gives an indication of the ability of a business to convert income into profit. Businesses with low ratios will generate more profit than others.
In general business operations with larger and more stable cashflow can sustain higher ratios than smaller and less stable operations. Scale and income stability are important considerations though it is up to the management of a business to monitor costs in an appropriate manner whatever its size.
There should be a balance between reducing or maintaining tight control of running costs in the short term and reinvestment in the future. This balance needs to be considered in terms of the current needs and strategy of the business and where it is heading in the medium to long term. You should seek professional advice in considering these issues and this ratio.
Ratios should be considered over a period of time (say three years), in order to identify trends in the performance of the business.
The calculation used to obtain the ratio is:
Operating Expenses =
Cost of Goods Sold + Total Expenses
- (Finance + Depreciation) x 100
NOTE: The calculator is provided for illustrative purposes only and the calculations are based on the accuracy of the information provided by you. The information about the calculators and the results of the calculations are necessarily general and are only intended as a guide. When deciding on what your business will do, many factors need to be considered, including your business' situation and financial position.
ANZ will not store the information provided in this calculator.