Concept Explanation: Operating Ratio
Ans. Operating Ratio: Operating activities are related to main business activities of enterprise giving capital principal revenue to enterprise. It excludes investing and financial activities.
Examples of cash inflow from operating activities are:
(1) Cash receipts for cash sales.
(2) Cash receipts from debtors.
(3) Cash receipts from commission
(4) Other revenue receipts.
Examples of cash outflow from operating activities are:
(1) Purchase of goods for cash.
(2) Payment to creditors
(3) Payment of operating expenses.
(4) Payment of taxes etc.
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