Question

Assertion (A): Operating ratio is = 100 - operating profit ratio.

Reason (R): Operating ratio is computed to reveal the operating margin on products sold.

In the context of the above two statements which of the following is correct:

Options

• Both statements are incorrect.

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

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

• Both (A) and (R) are correct and (R) is the correct reason of (A).

Answer 1

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

Explanation:

Operating Ratio + Operating Profit Ratio = 100

The operating ratio is calculated to determine how well management produces income.