OPERATING RATIO

 Operating Ratio –

Operating Ratio is the ratio which the total working expenses excluding suspense of a Railway bear to its gross earning or in other words represents the percentage of working expenses in this connection include appropriation to DRF and Pension fund as well. This is used to measure the efficiency of the railway.  In other words, it represents the percentage of Working Expenses to Total Earnings.

Operating Ratio has been regarded as one of the most important financial statistics and has frequently been used as an index of the operating efficiency of a Railway. This ratio continues to be worked out from year to year and is reflected in the accounting system. In comparing the ratio of one year with another of the same

Railways, great care must be taken to see that the terms “Working expenses” and “Gross earnings” are clearly defined and that the figures have been compiled on the same basis. The object of a Railway Administration is to keep this ratio as low as possible consistent with efficient working and good maintenance; it will tend to fall with efficient working, increase of traffic and fall in expenditure.