Technicals Stability Returns

Understanding Operating Expenses (Opex) Ratio

Operating Expenses Ratio measures the efficiency and profitability of the company. This ratio indicates how well the company controls its expenses relative to company revenue.

Opex Ratio is useful to compare expenses of the companies that operate in the same industry. This metric is commonly used for the Real Estate Industry compared to any other industry.

A lower OPEX ratio is more desirable because it indicates that expenses are minimal compared to revenue. A higher ratio indicates that the company is not managing its operating expenses.

The formula for calculating Operating Expenses Ratio

Operating Expenses Ratio

Example: For the financial year, Oberoi Realty reported the cost of goods sold as Rs. 890.83 and total revenue as Rs. 2052.58.
The value as per the formula (Cost of Goods Sold / Total Revenue), is calculated as (890.83 / 2052.58) = 0.43