Financial Operations Ratio-meaning and formula

Financial Operations Ratio-meaning and formula

The efficiency of the financial management of a firm is calculated through the financial operations’ ratio. This ratio is a calculating device of the cost and the return of financial charges. This ratio signifies a relationship between net profit after tax and operating profit.

The formula for the computation of this ratio is:

Financial Operations Ratio =net profit after tax/operating profit X 100

Here, the term “operating profit” means sales minus operating expenses. A higher ratio indicates the better financial performance of the firm.

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