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.