For running the business or profession, we need operating expenses. These expenditures are paid for day to day office lighting, salary, rent, administration, insurance premium, Internet bill, travelling expenses and many other expenses for sales and research. It also include the depreciation on fixed assets.
It is the base of calculating of net profit. Net profit can be calculating after deducting operating expenses from gross profit. It is also useful for managerial analysis. Operating cost divided by sale will be operating ratio and it will show the amount out Rs. 100 sale which are utilized for paying all these expenses. By calculating this expenses or cost, businessman can take many decision to reduce these type of expenses.
It is the base of calculating of net profit. Net profit can be calculating after deducting operating expenses from gross profit. It is also useful for managerial analysis. Operating cost divided by sale will be operating ratio and it will show the amount out Rs. 100 sale which are utilized for paying all these expenses. By calculating this expenses or cost, businessman can take many decision to reduce these type of expenses.
