Legal Definitions - operating-cost ratio

The operating-cost ratio is a financial metric that measures the relationship between a company's net sales and its operating costs. It is calculated by dividing the operating costs by the net sales.

For example, if a company has net sales of $1,000,000 and operating costs of $800,000, the operating-cost ratio would be 0.8 or 80%.

The operating-cost ratio is an important indicator of a company's financial health. A high operating-cost ratio indicates that a company is spending a large portion of its revenue on operating expenses, which can be a sign of inefficiency or poor management. On the other hand, a low operating-cost ratio suggests that a company is able to generate a significant amount of revenue while keeping its operating expenses under control.