Question

Assertion (A): A high operating ratio indicates a favourable position.

Reasoning (R): A high operating ratio leaves a high margin to meet non-operating expenses.

Options

• (A) and (R) both are correct and (R) correctly explains (A).

• Both (A) and (R) are correct but (R) does not explain (A).

• Both (A) and (R) are incorrect.

• (A) is correct but (R) is incorrect.

Answer 1

Both (A) and (R) are incorrect.

Explanation:

A high operating ratio is unfavourable because it indicates that operating costs are high and operating profit is low. Also, a high operating ratio results in a narrow margin for non-operating expenses. Thus, both Assertion and Reason are incorrect.