Question

Both ______ are complementary to each other and thus, if one of such ratios is deducted from 100, another ratio is derived.

Options

• Current Ratio and Quick Ratio

• Debt to Equity Ratio and Total Assets to Debt Ratio

• Operating Ratio and Operating Profit Ratio

• Working Capital Turnover Ratio and Inventory Turnover Ratio

Answer 1

Both Operating Ratio and Operating Profit Ratio are complementary to each other and thus, if one of such ratios is deducted from 100, another ratio is derived.

Explanation:

These two ratios are complementary because they split total sales revenue into costs and profits. The Operating Ratio measures the percentage of revenue consumed by operating expenses, while the Operating Profit Ratio measures the percentage left over as operating profit. Since total operational costs plus operational profits must equal total sales, their combined sum is always 100%. Therefore, subtracting one from 100 automatically gives you the other.