Question

QUESTION 13 1. Why is it important to compare a business's operating expense percentage to industry benchmarks 1. It helps management do a better job of collecting receivables II. It helps determine the business's financial risk III. It reflects how well the business is managing its expenses compared to its peers. IV. It provides important insight into management integrity a. I and II only. b. I and III only. c. II and III only. d. III and IV only

Answer 1

Answer:

Option C is correct i.e II and III only

Explanation:

While comparing our Business operating expenses percentage to industry's benchmarks helps us in identifying of expenses compared to it;s peer's so that to remain competitive in industry as well as we can identify the future financial risk associated.

The operating ratio shows the efficiency of a company's management by comparing the total operating expense of a company to net sales. The operating ratio shows how efficient a company's management is at keeping costs low while generating revenue or sales.

An operating ratio that is going up is viewed as a negative sign, as this indicates that operating expenses are increasing relative to sales or revenue. Conversely, if the operating ratio is falling, expenses are decreasing, or revenue is increasing, or some combination of both.

A company may need to implement cost controls for margin improvement if its operating ratio increases over time. An operating ratio that is decreasing is viewed as a positive sign, as it indicates that operating expenses are becoming an increasingly smaller percentage of net sales.