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Sunday, April 17, 2011

Expense Ratio Formula & Example

Definition: Expense Ratios show the relationship of various expenses to net sales. It is calculated by dividing a particular expense or group of expense with the net turnover. The lower the expense ratio, the larger is the profitability.

Formula:
Overhead Expense Ratio =  (Overhead expenses / Net sales) * 100%

Example 1:
Calculate expense ratios given the following figures:
Administrative

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