operating expense ratio

operating expense ratio

The ratio between operating expenses and potential gross income.Such ratios will generally be similar among properties or businesses in the same geographical area with the same or similar characteristics.Knowledge of such ratios allows a developer or entrepreneur to create a pro forma estimate of future income and expenses for a new business.It also allows a property owner to conduct a reality check of its own operations,to see if its own operating expense ratios are consistent with those of other properties in the local marketplace. (An operating expense ratio that is higher than expected may be an indication of inefficiency, embezzlement, or pricing one's goods and services too cheaply.)