What Is the Operating Ratio, How Is Computed and What

question 16

Essay

What is the operating ratio, how is computed and what does it measure?

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Definitions:

Capitalize

To record a cost/expense on the balance sheet for the purposes of delaying full recognition of the expense over time through depreciation or amortization.

Expense Capital Assets

The process of recording the cost of a capital asset as an expense over its useful life, often through depreciation or amortization.

Not-for-profit Organization

A type of organization that does not distribute its excess profits to owners or shareholders but instead uses them to help achieve its goals.

Capital Fund

A fund created for the purpose of undertaking capital projects or investing in long-term assets, funded by capital expenditures or external financing sources.